Bearish option traders are hitting big profits in downside positions on the SPDR S&P Regional Banking ETF (KRE).
On Jan. 17, Market Rebellion’s Unusual Option Activity Service found that 9,000 March $54 puts were bought for $0.51 as part of a bearish roll with shares at $60.37. This was clearly fresh buying, as the open interest in the contract before the activity appeared was just 1,296.
Those puts have traded up to $5.80 so far this session, over 11 times their purchase price. The stock declined 18.63% 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.
KRE was last down 2.21% at $51.85.
Ready to start trading? Try Unusual Option Activity Essential. Learn how you can follow the “smart money” with a fresh UOA trade idea each week – including technical levels so that you know how to manage each trade!