$TAL put prices rise

TAL Education (TAL) is down sharply today, delivering big gains to downside option traders.

Just two days ago, on Mar. 24, Market Rebellion’s Unusual Activity Service identified the purchase of 5,000 April $55 puts for $0.45 as part of a bearish roll with shares at $61.51. This was clearly fresh buying, as open interest in the strike was only 652 contracts before the activity appeared.

Those puts have traded for as much as $8.20 so far this session, over 18 times their purchase prices. The stock fell 21.12% in the same time frame, illustrating the kind of leverage that can be achieved quickly with options.

This winning trade comes after bullish option traders scored giant gains on upside positions just last month, showing how nimble option traders can take advantage of underlying moves in either direction.

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.

TAL was last down by 16.02% to $50.99 this afternoon. The Chinese education company was downgraded to Neutral at Citi Tuesday morning.