$GM put prices double in hours

Option traders who opened bearish option positions in General Motors this morning were collecting sizable profits by the end of the day.

A few minutes after the opening bell, Investitute’s market scanners found that 2,500 Weekly $34 puts expiring on Dec. 28 were purchased for $0.54 to $0.63 with shares at $34.34. This was clearly fresh buying, as open interest in the strike was only 406 contracts before the activity appeared.

Those puts traded for as much as $1.10 this afternoon, twice their initial purchase price. The stock fell 2.91% at the same time, showing how quickly options can far outperform moves in their underlying shares on a relative basis.

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.

GM was down 2.24% to $70.34 today. The auto maker rallied with quarterly results at the end of October but has since fallen with plans to close a major plant in Canada.