Put prices double in $SMH

Option traders doubled their money on bearish positions in the VanEck Vectors Semiconductor Fund today.

On Oct. 18, Investitute’s tracking systems showed that 20,000 December $93 puts were purchased for $3.30 with shares at $96.69. This was clearly a new position, as open interest in the strike was only 243 contracts before that session began.

Those puts traded for $6.85 this afternoon, better than twice their purchase price. The stock fell 7.23% 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.

SMH was down 6.71% to close at its session low of $88.82 today. The exchange-traded fund slipped lower as its components, manufactures of semiconductors, fell.