Bears hit a gusher in $AMLP

Bearish option traders have hit quite the gusher, making exponential gains on downside put positions in the Alerian MLP Fund (AMLP).

On Mar. 6, our Unusual Activity Service detected the purchase of 25,000 April $6 puts for $0.29 as part of a bearish roll with shares at $6.22. This was clearly fresh buying, as open interest in the strike was only 2,690 contracts before that session began

Those puts ended today’s session marked for $1.95, over 6.5 times their purchase price. The stock fell 35.85% in the same time period, underscoring how options can far outperform 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.

AMLP ended the session down 3.62% at $3.99. The exchange-traded fund which tracks the Alerian MLP Infrastructure Index gapped sharply lower the morning of Monday, Mar. 9 and has remained depressed amid lower West Texas Intermediate prices, which hit a 21-year low of $19.21 earlier in the session today.