How downside options gained in $SM

Bearish option traders turned big profits in SM Energy today.

On July 28, Investitute’s market scanners identified the purchase of 7,500 September 15 puts in one print for $0.75 with shares at $17.84. This was clearly a new position, as open interest in the strike was 91 contracts before the trade occurred.

Today those puts sold for $2.35, more than tripling in value. The stock dropped 26.2 percent in the same period, a large move but nowhere near 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.

SM was down 2.73 percent to $13.17 today. The oil and natural-gas producer fell along with other energy names as refinery damage from Hurricane Harvey reduced the demand for crude.