$XLE put prices rise

The SPDR Energy Fund (XLE) is pumping fast profits to bearish option traders this session.

On Oct. 2, Market Rebellion’s Unusual Option Activity Service found that 12,500 Weekly $87 puts, expiring Oct. 13, were bought for $0.25 with shares at $88.63. This was clearly fresh buying, as the open interest in the contract before the activity appeared was just 1,053.

Those puts traded for as much as $2.72 today, a 988% return, while the stock fell 4.29% in the same time frame, showing how quickly options can far outperform moves in their underlying shares on a relative basis.

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.

XLE ended the session down 0.62% at $85.22.