Bears triple their money in $RIG

Transocean fell today after quarterly results, yielding large profits on downside option positions.

On Feb. 1, Investitute’s proprietary programs cited the purchase of 4,950 March 11 puts for $0.56 as part of a bearish spread with shares at $11.43. Volume was above the strike’s open interest, showing that this was a new position.

Those puts traded for $1.94 just before the closing bell today, 3.5 times their purchase price. The stock dropped 21% 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.

RIG was down 0.88% to $9.01 today. The offshore driller reported a quarterly loss that was smaller than expected yesterday afternoon.