$PENN wager pays off for bears

Penn National Gaming (PENN) dealt bearish option traders a winning hand today.

On Feb. 26, Market Rebellion’s Unusual Activity scanners identified the purchase of 5,000 April $30 puts for $2.20 as part of a bearish spread with shares at $30.49. These were clearly new positions, as open interest in the strike was a mere 661 contracts before the activity appeared.

Those puts traded up to $4.37 this morning, just shy of doubling their purchase price. The stock declined 11.15% in the same time frame, illustrating the kind of leverage that can be achieved through 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.

PENN initially opened at $29.70 this morning but then traded back higher to close at $28.22, off 4.57% on the day. The casino operator has seen its shares fall under pressure, alongside its peers, over the past week amid concerns surrounding the COVID-19 Coronavirus.