$NKLA bears turn gains overnight

Nikola (NKLA) bears turned big gains on downside option positions today, opened just yesterday.

Just yesterday morning, on Dec. 23, Market Rebellion’s Unusual Activity Service flagged the purchase of 5,600 Weekly $15 puts, expiring today, Dec. 24, for $0.35 to $0.80 with shares at $15.47. This was clearly fresh buying, as open interest in the strike was only 2,211 contracts before the activity appeared.

Those puts traded for as much as $1.49 this morning, more than 2.5 times their average purchase price. The stock fell 12.67% in the same time frame, a huge move but nothing like that of its options.

Long puts lock in the price where a stock can be sold no matter how far it might drop, gaining value in a selloff with the potential for significant leverage. The contracts can be purchased either as an outright bearish bet or a hedge on a long-stock position.

NKLA closed lower on the day by 8.52% at $13.75. The battery-electric and hydrogen fuel-cell electric vehicle maker’s shares fell after an announcement yesterday before the opening bell that it and Republic Services (RSG) had ended their collaboration on a refuse truck.