Bears rack up gains as $GT falls

Downside option traders have doubled their money in Goodyear Tire & Rubber.

On June 29, Investitute’s proprietary programs cited the purchase of 5,800 August $24 puts for $1.30 to $1.40 with shares at $23.63. Open in interest in the strike was only 388 contracts before that session began, showing that this was fresh buying.

Those puts traded as high as $2.70 today, double their purchase prices. The stock fell 8.68% in the same time period, underscoring how options can far outperform moves in their underlying shares.

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.

GT was down 1.87% to $22 today. This morning Goldman Sachs downgraded the tire maker to “sell” from “neutral” and cut its price target to $18 from $25. The company’s quarterly results are expected on July 26 after the market closes.