Bears score big as $HCLP plunges

Option traders have more than tripled their money on downside positions in Hi-Crush Partners.

On Oct. 29, Investitute’s market scanners identified the purchase of 3,000 March $5 puts for $0.55 with shares at $8.03. This was clearly new positioning, as open interest in the strike was only 995 contracts before the activity appeared.

Those puts traded for as much as $1.90 today, about 3.5 times their purchase price. The stock plummeted 57.29% in the same time period, a huge move but still nowhere near 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.

HCLP dropped 15.67% to $3.66 today. The fracking-sand producer, which had fallen sharply with the rest of the energy sector as the price of crude plunged, announced this morning that it is suspending its dividends.