$MUR bears quadruple money

Option traders rang the register on large downside positions in Murphy Oil (MUR) today.

On July 9, Our market scanners identified the purchase of 5,500 October $22.50 puts for $1.09 as part of a bearish roll with shares at $24.55. This was clearly a new position, as open interest in the strike was only 603 contracts before the trade occurred.

Those puts sold for $4.35 today, 4 times their purchase price. The stock dropped 24.6% in the same time period, underscoring how 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.

MUR is down 6.47% to $18.44 in afternoon trading. Shares of the oil and gas producer fell after quarterly results last week as the price of crude has dropped.