On Oct. 18, Market Rebellion’s Unusual Option Activity Service found that 3,300 November $55 puts were bought for $3.90 to $6.10 with shares at $60.73. This was clearly fresh buying, as the open interest in the contract before the activity appeared was just 308.
Those puts have traded up to $21.30 so far this session, over 3 times their purchase prices. The stock declined 43.92% 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.
SI was last down 0.69% at $34.45.
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