Bearish option traders are seeing big profits today in the iShares US Medical Devices ETF (IHI).
On Sep. 18, Market 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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