$XLE option bears strike a gusher overnight

The SPDR Energy Fund (XLE) is pumping fast profits to bearish option traders this session.

On Jan. 3Market Rebellion’s Unusual Option Activity Service found that 10,000 Weekly $83.50 puts, expiring this Friday, were bought for $0.26 to $0.29 with shares at $87.19. This was clearly fresh buying, as the open interest in the contract before the activity appeared was just 294.

Those puts traded for as much as $1.35 today, over 4.5 times their purchase price. The stock fell 4.68% 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.

XLE was down 0.012% to close at $84.39.

Ready to start trading? Try Unusual Option Activity Essential. Learn how you can follow the “smart money” with a fresh UOA trade idea each week – including technical levels so that you know how to manage each trade!

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