Tenet Healthcare’s recent drop has resulted in exponential gains for downside option positions.
Last Monday, Investitute’s tracking systems detected the purchase of 6,280 August $16.50 puts for $1.25 as part of a bearish roll with shares at $16.48. This was clearly fresh buying, as open interest in the strike was just 73 contracts before the trade occurred.
Today those puts traded for $3.50, nearly tripling in value. The stock has plunged nearly 21 percent at the same time, a large move but still nowhere near that of its 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.
THC fell 7.26 percent to $13.03 today. The health-services provider is down sharply since missing earnings expectations and lowering its outlook a week ago.