Bearish trades score big in Oasis

Oasis Petroleum is trading at multi-month lows, returning exponential gains on downside option positions.

On April 19, Investitute’s proprietary programs detected the purchase of 3,000 August $10 puts for $0.70 with shares at $12.23. This was clearly fresh buying, as open interest in the strike was only 822 contracts before the activity appeared.

Those puts were listed at $2.05 today, representing a profit just shy of 200 percent. The stock dropped almost 33 percent in that same time frame, a significant move but one that was dwarfed by the gain in the options.

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.

OAS was up 0.49 percent to $8.21 today but fell to $8.11 earlier in the session. That was the lowest intraday price since August 2016 for the oil and gas producer.