Bears profit as Wal-Mart slides

Wal-Mart Stores is trading at three-month lows, resulting in exponential gains for downside option positions.

On June 8, Investitute’s tracking systems detected the purchase of 5,000 August $80 puts for $2.44 to $2.73 with shares at $79.28. Open interest in the strike was just 299 contracts before the trades occurred, showing that they were new positions.

Today those puts traded up to $7.45, tripling in value. The stock fell just 7.66 percent in the same time frame, illustrating how options can far outperform their underlying shares. It was the second winning put trade in WMT in the last month.

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.

WMT was down 2.79 percent today to close at $73.23, falling with the rest of the retail sector ahead of Amazon Prime Day tomorrow. Wal-Mart is scheduled to announce quarterly results in the pre-market on Aug. 17, the day before the puts expire.