Bears quintuple money in $XOP

Downside option positions yielded exponential returns today as the SPDR S&P Oil & Gas Exploration & Production Fund continued to plummet.

On Nov. 18, Investitute’s market scanners showed that 6,000 Weekly $27 puts expiring on Dec. 28 were purchased for $0.45 as part of a bearish roll with shares at $28.10. This was clearly a new position, as open interest in the strike was a mere 21 contracts before that session began.

Those puts traded for $2.33 today, more than 5 times their purchase price. The stock fell 11.96% in the same period, underscoring how 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.

XOP dropped 4.85% to $24.12 today, its worst level since March 2016. The exchange-traded fund has plummeted with the price of crude in recent months.