Puts power up as $PLUG powers down

Plug Power (PLUG) traded lower today, and bearish option traders are taking profits.

On Feb. 16, Market Rebellion’s Unusual Activity programs flagged the the purchase of 4,000 Weekly $50 puts, expiring tomorrow, for $1.35 to $1.42 with shares at $58.97. Volume was clearly above the previous open interest of 553 contracts, indicating that this was a new position.

Those puts traded for as much as $6.65 this session, over 4.5 times their purchase price. The stock fell 26.11% 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.

PLUG was down this session by 6.82%, closing at $43.34. The hydrogen fuel cell manufacturer missed top and bottom line estimates for its earnings report delivered this morning.