$XLF bears triple their money

Bearish traders tripled their money today in downside option trades on the SPDR S&P Financial Fund (XLF).

On Jun. 5, Market Rebellion’s Unusual Activity tracking systems detected the purchase of 99,890 July $25 puts as part of a bearish roll for $0.74 with shares at $26.35. This was clearly a new position, as the call volume was far above the strike’s open interest of 4,921 contracts.

Those puts have traded up to $2.27 today, more than triple their original purchase price. The stock fell 12.79% in the same time period, illustrating the kind of leverage that can be achieved through 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.

XLF fell this morning to trade as low as $22.91 and was last at $23.05, down 3.23% on the day, as it and the broader market pulled back from their recent highs amid an increase in coronavirus cases in some states.