Downside options positions turned enormous profits today as General Electric dropped to its lows level in six years.
On Sept. 22, Investitute’s proprietary programs cited the purchase of 7,500 November $24 puts for $0.43 as part of a bearish spread. Shares were at $24.95 at the time.
Those puts traded up to $6.49 this afternoon, 15 times its purchase price. The stock has plunged nearly 30 percent in the same time period, a huge move but still far less than that of its options on a relative basis. Investitute co-founder Pete Najarian mentioned another bearish trade, a large December put roll that just occurred today, on CNBC’s “Fast Money” program last night.
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.
GE fell 5.89 percent to $17.90 today. The industrial giant continued to slide after cutting its dividend yesterday and drawing several analyst downgrades this morning.