It look less than 60 minutes for bearish option traders to see significant returns on downside positions in VF Corporation today.
Just before 2 p.m. ET, Investitute’s proprietary systems showed that 4,700 August $55 puts had been purchased for $1.44 to $1.50 with shares at $56.59. This was clearly fresh buying, as open interest in the strike was only 247 contracts before the day began.
Less than an hour later, those puts jumped to $2.05 as volume swelled near 10,000 contracts. That was a gain of more than 40 percent while the stock was down just 1.3 percent in the same time, illustrating how quickly and options can significantly outperform their underlying shares.
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.
VFC was up 0.99 percent today to close at $55.88, despite sliding in the afternoon. The apparel company, whose brands include Nautica and Wrangler, fell sharply after its last earnings report on April 28 but has since recovered much of that ground.