Puts rack up profits in $VXX

Downside option positions have turned big gains in the iPath S&P 500 VIX Short-Term Futures Note.

On May 9, Investitute’s tracking systems found that 20,000 $37.50 puts expiring on May 18 were purchased for $0.81 with shares at $38.53. This was clearly a new position, as open interest in the strike was only 1,117 contracts before that session began.

Those puts traded up to $2.20 today, more than double their purchase price. The stock dropped 7% in the same time period, underscoring how options can far outperform moves in their underlying shares.

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.

VXX fell 1.65% to $35.75 today. The exchange-traded note, which reflects volatility in the S&P 500, usually trades inversely to equities.