Downside trades surge in Emerge

Bearish positions have benefited greatly from the recent drop in Emerge Energy.

On May 15, Investitute’s proprietary programs found that 10,000 Weekly $13.50 puts expiring on June 9 were purchased mostly for $0.80 with shares at $14.19. There was no open interest in the strike before the trade occurred, showing that it was a new position.

Today those puts were listed at $2.75, representing a profit of more than 240 percent. The stock has dropped about 24 percent in the same period, illustrating 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 was down 3.06 percent to $10.77 today. The fracking-sand producer pulled back after earnings missed estimates on May 8.