$FXI bears quintuple money

Bearish option traders are scoring a big win in downside positions on the iShares China Large-Cap Fund (FXI) today.

On Sep. 13Market Rebellion’s Unusual Option Activity Service found that 46,000 October $28 puts, expiring this Friday, were bought as part of a bearish spread for $0.74 with shares at $28.94. This was clearly fresh buying, as open interest in the contract was just 33,843 before the activity appeared.

Those puts have traded up to $4.20 so far this session, over 5.5 times their purchase price. The stock declined 17.83% in the same time frame, 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.

FXI was last lower by 4.37% at $23.62.

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