Option bears drink up gains in $BUD

Bearish option traders are toasting fast gains in Anheuser Busch Inbev (BUD) today.

On Jul. 2, Market Rebellion’s Unusual Activity Service detected the purchase of 5,000 Weekly $71 puts, expiring this Friday, for $0.64 as part of a bearish spread with shares at $71.35. There was no open interest in the contract before the trade occurred, showing that this was a new position.

Those puts traded for as much as $1.58 so far today, more than 2 times their purchase price. The stock fell by 1.57% in the same time period, underscoring how options can far outperform their underlying shares.

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.

BUD is down 1.54% to $70.37 this afternoon. The beer maker is scheduled to report earnings before the opening bell on Jul. 29.