Option traders turned exponential profits on downside positions in Uber (UBER) today.
On Friday, Jan. 22, Market Rebellion’s Unusual Activity Service found that 8,000 Weekly $53.50 puts, expiring this Friday, Jan. 29, were bought for $0.75 to $1.08 with shares at $54.29. Open interest in the strike was only 422 contracts before the trades occurred, indicating that this was new positioning.
Those puts traded for as much as $3.75 today, or over 3 times their purchase prices. The stock declined by as much as 7.64% in the same time frame, illustrating the kind of leverage that can be achieved 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.
UBER closed at $54.29, down 0.037% on the session after falling to an intraday low of $49.65 earlier in the session. The ride-sharing service is scheduled to report earnings on Feb. 10 after the close.