The plunge in Continental Resources has yield huge returns on downside positions that expired today.
On May 12, Investitute’s scanners detected the purchase of 13,100 June $39 puts for $0.80 to $0.85 with shares at $42.06. pen interest of 163 contracts. Stock 42.06.
Those puts sold for $5.90 today, representing a gain of more than 600 percent. The stock fell 21.4 percent in the same period, a large move but nothing compared to that of the 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.
CLR slipped 0.12 percent to close at $33.01 after hitting another 52-week low of $32.53 earlier in the session. The oil and natural-gas producer has pulled back with other energy names as the price of crude has tumbled, and shares are trading at their lowest level since April 2016.