Short-dated puts in $SPY turn quick profits

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

Just yesterday morning on Jul. 8, our Unusual Activity Service found that 9,755 Weekly $312 puts expiring on Jul. 10 were bought for $1.25 as part of a bearish spread above open interest of 8,091 contracts with shares at $315.39.

Those puts traded for as much as $3.15 today, over 2.5 times their purchase price. The stock fell 1.49% 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 $310.68 before pulling back higher to end off 0.57% today, settling at $314.38.