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US move to end private prisons hurts shareholders, but rewards some options traders

NEW YORK, Aug 18 (Reuters) - News that the U.S. Justice Department plans to stop its use of privately operated prisons hammered the shares of prison operators on Thursday, but some options traders made out like bandits on the news.

Shares of prison operators Corrections Corp of America and GEO Group Inc fell more than 35 percent each, posting their largest daily declines on record volume following the DOJ announcement.

With the plunge in the stock price, holders of bearish options stand to make money.

Recent trading in CCA's options and an increase in short interest suggests some traders were prepared for the news.

The past month was the busiest ever for CCA options, particularly for puts, options contracts that benefit from a slump in the share price.

Short sellers, traders who bet the price of a stock will fall, were also...


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