Bears triple their money in $CL

Downside option positions racked up large profits after Colgate-Palmolive reported weak sales numbers today.

On April 9, Investitute’s proprietary programs found that 2,250 Weekly $71 puts expiring on April 27 were purchased for $1.36 to $1.45 as part of a bearish spread with shares at $71.67. Open interest in the strike was a mere 7 contracts before the trade occurred, showing that it was a new position.

Those puts traded for $4.90 today, more than 3.5 times their initial purchase price. The stock fell 8% in the same time frame, illustrating how options can far outperform 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.

CL ended today’s session down a penny at $66.58. The personal-hygiene products company missed revenue estimates this morning.