Downside trades flourish in Fluor

Short-term bearish positions in Fluor racked up exponential gains before expiring today.

On Monday, Investitute’s tracking systems showed that 2,600 Weekly $44 puts expiring this afternoon were purchased for $0.90 to $1.10 with shares at $44.34. These were clearly new positions, as open interest in the strike was a mere 32 contracts before the activity appeared.

Those puts sold for $5.10 this morning, an average gain of more than 400 percent in less than a week. The stock efll 12.3 percent at the same time, illustrating the kind of leverage that can be achieved with 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.

FLR was down 8.66 percent to $40.06 today. The engineering and chemical company fell sharply after posting a surprise loss and lowering its outlook after yesterday’s close.