Option traders are scoring profits today on downside positions opened in Rambus Inc (RMBS) last week.
On Oct. 25, Market Rebellion’s Unusual Option Activity Service found that 2,400 November $49 puts were bought for $1.50 to $1.65 with shares at $52.99. This was clearly fresh buying, as open interest in the contract was just 139 before the activity appeared.
Those puts have traded for as much as $2.97 this session, an 80% return, while the stock fell 7.23% 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.
RMBS is down 4.08% to $49.08 in midday trade.
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