Emerge Energy Services dropped with the price of oil today, resulting in exponential gains for downside positions.
On May 15, Investitute’s tracking systems showed that 10,000 Weekly $13.50 puts expiring on June 9 were purchased for $0.80 with shares trading at $14.19. These were new positions, as there was no open interest in the strike before the trades occurred.
Today those puts were listed at $2.33, more than tripling in value barely a week later. The stock was down 20 percent in the same time, underscoring how options can far 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.
EMES fell 6.5 percent today to close at $11.36. The fracking-sand producer declined along with the rest of the energy sector as crude gave up its early gains.