$I bears triple money in hours

Option traders who opened downside positions in Intelsat (I) this morning are already logging huge gains this afternoon.

About two hours into the session, Market Rebellion’s proprietary programs flagged the purchase of 15,545 December $9 puts mostly in one print of 14,801 for $1.15 with shares at $13.26. This was clearly fresh buying, as open interest in the strike was only 1,388 contracts before that activity appeared.

Those puts have traded for as much as $3.40 so far today, about 3 times their purchase price. The stock plummeted 49.02% at the same time, showing how quickly options can far outperform moves in their underlying shares on a relative basis.

It is the second winning downside trade in the name posted on Market Rebellion in less than a week. JP Morgan downgraded the satellite operator to “neutral” from “overweight” and cut its price target to $22 from $34 on Nov. 13.

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.

I was last down 45.08% to $7.37 in late-day trading. The stock plummeted after Federal Communications Commission Chairman Ajit Pai said he supports a public auction of C-Band radio spectrum controlled by a handful of satellite companies, including Intelsat.