$KR put buyers bag enormous returns

Bearish option positions in Kroger packed up quick gains before expiring today.

Just yesterday, Investitute’s scanners found that 2,400 Weekly $23 puts that expired this afternoon were purchased for $0.15 to $0.45 with shares at $22.61. These were clearly new positions, as open interest in the strike was only 536 contracts before the session began.

Those puts traded up to $1.71 today, representing an average profit of 470 percent in 24 hours. The stock fell just 3.2 percent at the same time, showing how quickly 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.

KR closed higher by 3.03 percent to $21.74 today but dipped to $21.30 in the morning. The stock dropped sharply along with other grocery names yesterday after Amazon.com announced that its new subsidiary Whole Foods Markets would be slashing prices.