Puts surge as Casey’s falls short

Casey’s General Stores dropped sharply on poor quarterly results this morning, resulting in fast money for bearish traders.

Just yesterday, Investitute’s market scanners showed that 2,000 June $115 puts were purchased for $2.60 with shares at $116.35. This was clearly a new position, as open interest in the strike was only 305 contracts before it occurred.

Those puts traded as high as $9 this afternoon, a gain of more than 240 percent in 24 hours. The stock was down less than 9 percent at the same time, underscoring 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.

CASY fell 8.45 percent to $106.66 today. The convenience-store chain missed earnings and revenue estimates before the market opened.