Chesapeake bears turn quick profits

Bearish option traders doubled their money in Chesapeake Energy only 24 hours after opening their positions.

Just yesterday, Investitute’s systems detected the purchase of 6,750 June $5.50 puts for $25 as part of a bearish spread with shares at $5.28. This was clearly a new position, as volume was well above the strike’s open interest of 4,410 contracts.

This afternoon those puts traded for $0.50, doubling in value. The stock was down just 5.3 percent in that time, showing how options can significantly 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.

CHK fell 4.92 percent to $5.02 today. The oil and gas producer has tumbled with the rest of the energy sector as the price of crude continues to cascade lower.