Option traders are scoring profits today on downside positions opened in Shopify Inc (SHOP) last month.
On Oct. 18, Market Rebellion’s Unusual Option Activity Service found that 2,300 Weekly $50 puts, expiring Nov. 3, were bought for $1.12 to $1.23 with shares at $55.47. This was clearly fresh buying, as open interest in the contract was just 577 before the activity appeared.
Those puts have traded for as much as $3.90 this session, an 217.07% return, while the stock fell 14.66% 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.
SHOP is down 1.59% to $69.83 in midday trade.
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