$GE bears make heavy gains

It took just one week for option traders to turn their money over 6 times in downside positions in General Electric (GE).

On Jul. 31, Investitute’s market scanners found that 42,500 September $9 puts were bought mostly in one print from $0.06 to $0.09 with shares at $10.76, after the company’s quarterly earnings report that morning. Open interest in strike was only 38,076 contracts before that session began, 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 have thus far traded for as much as $0.37 today, more than 6 times their initial purchase price. The stock has fallen 13.75% 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 is currently down 2.77% to $9.30 today. The industrial company reported earnings before the opening bell on July 31, beating estimates for its top and bottom lines, as well as raising guidance for the rest of its fiscal year.