$MMM bears post 3-fold gains

It took just three sessions for option positions to turn big profits on downside positions in 3M (MMM).

On July 5, Investitute’s market scanners identified the purchase of 8,900 July $160 puts for $0.29 to $0.43 with shares at $171.81. This was clearly fresh buying, as open interest in the strike was only 1,919 contracts before the activity appeared.

Those puts traded for as much as $1.11 today, more than 3 times their average purchase price. The stock fell 4.35% 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.

MMM is down 2.49% to $164.98 this afternoon, not far from its 52-week low of $159.32. This morning RBC Capital downgraded the industrial giant to “sector perform” from “outperform” and cut its price target to $176 from $207