Bearish option traders are collecting big profits in the SPDR S&P 500 Fund (SPY) today.
Yesterday on Jan. 17, Market Rebellion’s Unusual Option Activity Service found that 5,000 Daily $395 puts, expiring Jan. 23, were bought for $1.51 as part of a bearish spread with shares at $399.53. This was clearly fresh buying, as open interest in the contract was just 1,998 before the activity appeared.
Those puts traded up to $4.65 this session, more than 3 times their purchase price. The stock fell 2.04% in the same time frame, showing how quickly options can far outperform moves in their underlying shares 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.
SPY ended the session lower by 1.56% at $391.54.
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