Bears double their money in $XLE

The SPDR Energy Fund broke a new 52-week low today, as concerns of oversupply and a slowing global economy drive the price of crude oil lower.

On October 23, Investitute’s tracking systems identified the purchase of 3,000 December $69 puts for $2.99, as part of a bearish roll from an in-the-money trade, with shares at $68.15. This was clearly a new position, as open interest in the strike was only 2,283 contracts before the trade occurred.

Those puts rose to $6.10 today, twice their purchase price. The stock fell 6.74% 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.