$IHI option bears double money

Bearish option traders are seeing big profits today in the iShares US Medical Devices ETF (IHI).

On Sep. 18Market Rebellion’s Unusual Option Activity Service found that 9,000 September $55 puts, expiring today, were bought for $1.45 as part of a bearish spread and roll with shares at $54.56. This was clearly fresh buying, as open interest in the contract was just 237 before the activity appeared.

Those puts have traded for as much as $3.60 so far this session, more than 2 times their purchase price. The stock fell 5.99% in the same time frame, illustrating the kind of leverage that can be achieved quickly with 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.

The IHI was last at $51.02 this afternoon, down 2.05% on the day.

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