It took only a one session for bearish option traders to turn big gains in Sprouts Farmers Market Inc (SFM).
Yesterday on Aug. 1, Market Rebellion’s Unusual Activity Service found that 3,900 August $39 puts were bought for $1.45 to $1.85 above the existing open interest of 216 contracts with shares at $39.35.
Those puts have traded for as much as $2.55 this session, a 37.83% return, while the stock fell 1.85% 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.
SFM was last at $37.06, down 3.14% on the session.
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