$VALE bears double their money

Downside option positions opened in Vale just three days ago are already reaping large profits.

On Monday, Investitute’s proprietary programs showed that 6,200 Weekly $12.50 puts expiring on April 27 were purchased for $0.31 to $0.34 with shares at $12.98. This was clearly fresh buying, as open interest in the strike was a mere 40 contracts before the trades occurred.

Those puts went for $0.65 today, more than twice their initial purchase price. The stock fell 4.5% in the same time frame, underscoring how options can quickly 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.

VALE was down 1.02% to $12.65 today. The Brazilian producer of iron ore, which is used to manufacture steel, has declined with rising tensions over trade disputes.