Bears score big profits in $CNP

Downside option positions have turned into fast profits today after CenterPoint Energy (CNP) made a new 52-Week low.

Just last Thursday, on Mar. 5, Market Rebellion’s Unusual Activity Service flagged the purchase of 5,000 March $23 puts as part of a bearish roll for $0.65 with shares at $23.24. This was clearly a new position, as open interest in the strike was a mere 107 contracts before that session began.

Those puts traded for $8.01 today, more than 12 times their purchase price. The stock dropped 36.02% in the same time frame, illustrating 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.

CNP ended a volatile session down by 15.80% to close at $14.87 today, just off its new 52-Week low of $14.63 made earlier. The electric and natural gas utility has fallen sharply over the past month despite exceeding estimates in its latest earnings report.