$SPY option bears score

Bearish option traders are collecting big profits as the SPDR S&P 500 Fund (SPY) falls today.

On May 27, Market Rebellion’s Unusual Option Activity Service found that 36,000 June $404 puts were bought for $6.77 to $6.81 with shares at $412.10. This was clearly fresh buying, as open interest in the contract was just 7,489 before the activity appeared.

Those puts have traded up to $31.46 this session, over 4.5 times their purchase prices. The stock fell 9.18% in the same time frame, showing how quickly options can far outperform moves in their underlying shares on a relative basis.

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.

SPY is currently lower by 3.99% at $374.26.