Put buyers gain 330% as $PGR drops

Bearish option traders have more than quadrupled their money in Progressive.

On Aug. 23, Investitute’s proprietary programs cited the purchase of 2,000 September $48 puts for $0.39 with shares at $48.93. This was clearly new positioning, as open interest in the strike was just 55 contracts before the trades occurred.

Today those puts traded up to $1.70, representing a profit of more than 330 percent in a little more than a week. The stock fell 5 percent in the same time frame, showing 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.

PRG was off 0.19 percent to $46.48 today. The company has fallen along with other insurers with exposure in the areas that sustained severe damage from Hurricane Harvey.