$HES bears score huge profits

It took less than a week for option traders to reap huge returns on downside positions in Hess.

On Dec. 19, Investitute’s proprietary programs flagged the purchase of 3,000 January $40 puts for $0.44 to $0.50 with shares at $48.30. Volume was above the strike’s previous open interest of 2,803 contracts, indicating that this was fresh buying.

Those puts traded for $4.55 today, more than 9.5 times their average purchase price. The stock dropped 23.91% in the same time frame, a steep move but nowhere near that of its options 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.

HES plunged 12.2% to $36.43 today, its lowest level since January 2016. The oil and natural gas producer dropped after Venezuela’s Navy intercepted ships that the company was using at a development with Exxon Mobil (XOM) off the coast of Guyana amid a border dispute between the two countries.