Bearish traders are making quick gains today on downside option positions opened yesterday in the SPDR Communication Fund (XLC).
Those puts have traded for as much as $1.65 this session, a 120% return, while the stock fell 2.74% in the same time frame, illustrating the kind of leverage that can be achieved quickly 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.
XLC was last lower by 1.66% on the day to $76.51.