$LOW bears nail 300% profit in a day

Downside option positions saw quick gains as Lowe’s fell sharply today.

Just yesterday, Investitute’s tracking systems detected the purchase of 3,500 August $77 puts for $0.55 to $0.80 with shares at $77.78. This was clearly fresh buying, as open interest in the strike was only 818 contracts before the activity appeared.

Today those puts traded up to $2.63, representing an average profit of nearly 300 percent in 24 hours. The stock was down just 4.3 percent at the same time, showing how quickly options can far outperform their underlying shares. It was the second winning put trade Lowe’s has seen in the last month.

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.

LOW declined 4.4 percent to finish at $74.30 today. The home-improvement chain dropped after arch rival Home Depot pulled back despite reporting strong quarterly numbers.