$CTB put prices rocket sixfold

Bearish option traders made a killing in Cooper Tire & Rubber on poor quarterly numbers.

On March 15, Investitute’s proprietary programs flagged the purhchase of 2,700 May $28 puts in one print for $0.90 with shares at $30.03. Open interest in the strike a mere 23 contracts before the trade occurred, showing that it was a new position.

Those puts traded up to $5.30 today, more than 6 times their purchase price. The stock dropped 24.4% in the same time period, 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.

CTB fell 8.94% to $24.45 today. The tire manufacturer missed estimates on the top and bottom lines this morning.