$XLB puts double bears’ money

Option traders have turned quick profits in the SPDR Materials Fund as shares slump.

This past Thursday afternoon on Sep. 17, our Unusual Activity Service found that 4,500 October $65 puts were bought for $1.38 to $1.40 above open interest of 202 contracts with shares at $66.91.

Those puts traded for $3.20 today, more than twice their purchase prices. The stock fell 6.4% in the same time frame, illustrating the kind of leverage that can be achieved quickly with options.

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.

XLI was last trading 4.12% lower at $62.72. The exchange-traded fund-which tracks a basket of materials heavy-weights such as Sherwin Williams (SHW) and Newmont (NEM), has fallen sharply today amid concerns of a new coronavirus wave.