Why $NWL put buyers scored big

Newell Brands dropped after quarterly results this morning, handing huge profits to bearish option traders.

Last Friday, Investitute’s proprietary programs cited the purchase of 5,000 February $31 puts for $1.40 and $1.45 with shares at $31.24. against open interest of 319 contracts. Stock 31.24.

Those puts traded for $7 today, 5 times their original purchase price. The stock declined 22% in the same time frame, showing how options can far outperform moves in their underlying shares. It was the second consecutive quarter that bearish option plays off big in Newell.

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.

NWL plunged 20.56% to $24.81 today. The consumer-products maker fell sharply after announcing this morning that it might close half of its factories and warehouses as part of a massive restructuring plan.