$KO put prices pop

Coca Cola puts opened just two sessions earlier closed in-the-money today, after a Moody’s downgrade resulting from “more aggressive financial policy” stemming from the beverage giant’s $5.1 billion purchase of Costa Limited.

On Tuesday, Investitute’s tracking systems identified the purchase of 3,500 Weekly $50 puts for $0.13 to 0.59 with shares at $49.61. This was clearly a new position, as open interest in the strike was only 1,554 contracts before the trade occurred.

Those puts rose to $1.29 this morning, nearly three times their average purchase price. The stock fell 1.81% in the same time frame, 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.