$M bears check out with fast profits

Bearish option traders are checking out with fast profits in their downside positions on Macy’s (M) today.

On Nov. 11Market Rebellion’s Unusual Option Activity Service found that 5,000 November $21 puts were bought for $0.28 to $0.30 as part of a bearish spread with shares at $21.42. This was clearly fresh buying, as the open interest in the contract before the activity appeared was just 1,778.

Those puts have traded up to $1.41 this session, over 4.5 times their purchase prices. The stock declined 3.45% 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.

M was last down by 1.00% in late afternoon trade at $20.81.

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