Put buyers unearth big profits in $VALE

Vale (VALE) has fallen sharply this week, returning big profits on downside option positions opened a week ago.

On Apr. 14, Market Rebellion’s Unusual Activity programs detected the the purchase of 6,800 Weekly $18.50 puts as part of a complex bearish spread, expiring today, for $0.11 above the existing open interest of 82 with shares at $19.50.

Those puts traded for $1.36 this session, over 12 times their purchase price. The stock fell 12.05% 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.

VALE was last lower by 3.26% at $17.08 in midday trade.