How CBL puts turned big money

CBL & Associates Properties has plummeted along with other shopping-mall operators, sending bearish positions soaring.

On April 24, Investitute’s proprietary programs showed that 3,000 June $10 puts were bought mostly for $0.70 to $0.80 with shares at $9.73. The volume was well above the strike’s open interest of 1,558 contracts, indicating that this was new positioning.

Today those puts went for $2.50, more than tripling in value. The stock has fallen 23 percent in the same time, a large move but one that pales in comparison to the gains from the options.

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.

CBL dropped 5.1 percent to $7.45 today. The mall real-estate investment trust gapped down from above $9 after reporting earnings on May 3 and has continued to fall since.

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