Bears triple their money in $DG

Downside option positions in Dollar General yielded big bucks before they expired today.

On May 24, Investitute’s proprietary programs showed that 2,375 Weekly $95 puts expiring this afternoon were purchased as part of a bearish spread for $2.35 with shares at $96.18. This was clearly a new position, as volume was well above the strike’s open interest of 731 contracts.

Those puts traded for $7.83 this morning, more than 3 times their purchase price. The stock fell 8.8% in the same time frame, 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.

DG was up 2.03% to $89.26 today but tumbled 9.37% yesterday after the discount retailer missed earnings and revenue estimates.