Bearish option traders have made exponential returns on their money in downside positions in VF Corp (VFC).
On Sep. 20, Market Rebellion’s Unusual Activity Service flagged the purchase of 2,500 Weekly $38 puts, expiring this Friday, as part of a bearish roll or $0.60 to $0.71 with shares at $39.41. This was clearly a new position, as open interest in the strike was a mere 169 contracts before that session began.
Those puts traded for $4.93 today, nearly 7 times their purchase prices. The stock declined 15.83% in the same time frame, underscoring how options can far 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 down 6.87% to close at $32.66 today.