Options News
Bears post 14-fold gains in $MDR
McDermott has plunged with much of the energy sector in the last month, resulting in huge profits on downside option positions. On Oct. 9, Investitute’s proprietary programs flagged the purchase of 6,150 November $16 puts for $0.50 and $0.55 with shares at $17.84. This was clearly fresh buying, as open interest in the strike was […]
McDermott has plunged with much of the energy sector in the last month, resulting in huge profits on downside option positions.
On Oct. 9, Investitute’s proprietary programs flagged the purchase of 6,150 November $16 puts for $0.50 and $0.55 with shares at $17.84. This was clearly fresh buying, as open interest in the strike was only 424 contracts before the trades occurred.
Those puts ended today’s session marked at $7.40, 14 times their average purchase price. The stock plunged 52.5% in the same time period, a huge move but still far less than that of its options 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.
MDR dropped 12.05% to $8.47 today. Shares of the energy construction and engineering company has fallen with the price of oil and gapped lower after its quarterly results at the end of October.