Bearish option traders are hitting big profits in downside positions on Ally Financial Inc (ALLY)..
On Jan. 24, Market Rebellion’s Unusual Option Activity Service found that 18,000 March $28 puts were bought for $0.65 to $0.70 as part of a bearish spread, above the existing open interest of 10,322, with shares at $31.56.
Those puts have traded up to $7.00 so far this session, over 10 times their purchase prices. The stock declined 29.78% in the same time period, a large move but nowhere near that of its options on a relative basis.
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.
ALLY was last down 9.45% at $23.38.
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