Chicago Bridge bears turn profits

Traders have more than tripled their money from bearish positions in Chicago Bridge & Iron.

On May 10, Investitute’s market scanners detected the purchase of 6,000 May $24 puts for $0.15 with shares at $25.64. Open interest in the strike was a mere 25 contracts before that session began, showing that this was fresh buying.

Today those puts traded up to $0.71, a gain of more than 370 percent in four sessions. The stock was down 8.1 percent in the same period, showing how options can 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.

CBI ended today unchanged at $23.04.  The engineering and construction company badly missed bottom-line estimates for the first quarter on May 8.

For more information on Unusual Option Activity, visit this page.