Bears bask in SunTrust puts

SunTrust was hit hard with other financials in yesterday’s market drop, resulting in big returns for downside positions.

On May 1, Investitute’s market scanners found that 2,000 May $55 puts were purchased in one print for $0.29 with shares at $57.94. This was clearly a new position, as its volume was well above the strike’s open interest of 1,182 contracts. before that session began.

Today those puts traded as high as $1.16, yielding a profit of 300 percent. The stock fell less than 7 percent in the same time frame, underscoring how options can outperform their underlying shares.

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.

STI was up 0.9 percent today but, like most other banks, remains well below its levels before yesterday’s steep market selloff. The firm rose after reporting earnings on April 21 but gapped down from above $57 yesterday morning.