$SMH put prices continue to rise

Chip makers have been on the decline this month, and option traders have racked up large profits in downside positions in the VanEck Vectors Semiconductor Fund (SMH).

On Mar. 31, Market Rebellion’s proprietary programs detected the purchase of 10,000 Weekly $200 puts, expiring Apr. 4, for $1.75 to $1.85 with shares at $207.67. This was clearly a new position, as open interest in the strike was only 2,227 contracts before the activity appeared.

Those puts traded up to $5.60 today, a 202.7% return, while the stock fell 5.9% in the same time period, underscoring how options can far outperform 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.

SMH closed the session at $195.57, down 8.65%.