$XBI put buyers turn fast gains

It took less than a week for bears to double their money in the SPDR S&P Biotech Fund.

On March 13, Investitute’s proprietary programs flagged the purchase of 10,000 April $93 puts for $1.62 to $1.67 as part of a bearish spread with shares at $97.10. Volume was well above the strike’s open interest of 3,419 contracts, showing that this was a new position.

Those puts traded as high as $4 today, about 2.5% times their original purchase price. The stock fell 5.4% 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.

XBI was down 1.8% today to close at $91.89.