$UAL bears take to the skies

Option traders are racking up fast gains in United Airlines (UAL) today.

On Jun. 24, Market Rebellion’s Unusual Activity Service detected the purchase of 4,500 Weekly $54 puts, expiring this Friday, for $1.07 to $1.11 with shares at $54.31. Volume was well above the strike’s previous open interest of just 1,759 contracts, showing that this was a new position.

Those puts traded for as much as $2.70 today, more than 2 times their purchase prices. The stock fell by 4.81% 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.

UAL declined by 2.58% to close at $52.49 today.