Downside option positions in Qualcomm (QCOM) that expire next Friday are rewarding patient bearish traders today.
On Mar. 25, Market Rebellion’s Unusual Activity Service flagged the purchase of 3,500 October $130 puts for $7.60 to $7.95 with shares at $156.73. This was clearly a new position, as open interest in the strike was a just 227 contracts before that session began.
Those puts traded for as much as $21.01 today, over 2.5 times their purchase prices. The stock declined 30.45% 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.
QCOM was down 3.99% to close at $110.03 this afternoon.
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