$GE bears hit quick gains again

It has taken only two sessions for option traders to post exponential profits on downside positions in General Electric.

On Mar. 5, Investitute’s proprietary programs cited the purchase of 135,000 March 9 puts for $0.16 as part of a bearish spread and roll-down with shares at $9.74.
The open interest in the strike was 82,436 contracts before the trade occurred, showing that this was a new position, and apparently added to a previous purchase of those same puts on Feb. 28 for $0.03 with shares at $10.52.

Those puts traded for $0.40 today, 2.5 times their purchase price from just two days ago, and over 13 times their initial purchase price just one week ago. The stock fell as much as 13.59% in the same time frame, illustrating how quickly options can far outperform moves in their underlying shares on a relative basis.

This huge win for General Electric bears follows a previously winning trade noted by Investitute co-founder Pete Najarian on CNBC’s Halftime Report, Feb. 28.

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.

GE opened flat this morning and rallied higher by 3.73% to close at $9.45 this afternoon. The stock had a tumultuous end of February and start to March, as it announced several ongoing structural changes.