$GE bears turn quick gains

It has taken only a few sessions for option traders to post exponential profits on downside positions in General Electric.

On Feb. 28, Investitute’s proprietary programs cited the purchase of 135,000 March $9.50 puts for $0.08 as part of a bearish spread with shares at $10.58.
There was no open interest in the strike before the trade occurred, showing that this was a new position. Investitute co-founder Pete Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those puts traded for $0.40 today, 5 times their purchase price. The stock fell 8.03% in the same time frame, illustrating 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.

GE was down 4.72% to close at $9.89 this afternoon. The stock dropped after the industrial giant’s CEO cited “significant known headwinds to 2019 cash flow” at the JP Morgan Aviation, Transportation, and Industrials Conference today.