$SPY puts make quick profits

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

This past Friday afternoon on Sep. 18, our Unusual Activity Service found that 8,000 Weekly $322 puts expiring on Sep. 25, this Friday, were bought for $2.04 as part of a bearish roll above open interest of 2,013 contracts with shares at $329.41.

Those puts have traded for as much as $4.80 today, over 2 times their purchase price. The stock fell 2.32% 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 last down 2.42% today at $322.66.