Short-dated puts in $SPY turn fast gains

Bearish option traders collected fast gains as the SPDR S&P 500 Fund (SPY) dropped lower today.

On Wednesday of this week, Jun. 10, our Unusual Activity Service found that 18,000 Weekly $304 puts expiring on Jun. 26 were bought for $2.73 to $2.79 above open interest of 651 contracts with shares at $319.96.

Those puts traded for as much as $12.05 today, well over 4 times their purchase prices. The stock fell 6.61% in the same time frame, 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.

The SPDR S&P 500 Fund (SPY) was down to an intraday low of $298.60 before pulling back higher to end up 1.2% today to close at $304.21. Concerns, surrounding the rebound in the economy and equities after the coronavirus, have been attributed to recent volatility.