Puts surge as Emerge Energy tanks

Bearish traders have doubled their money in Emerging Energy Services.

On June 7, Investitute’s proprietary programs showed that 2,000 September $10 puts were purchased for $1.60 to $1.65 with shares at $10.10. This was clearly fresh buying, as open interest in the strike was only 198 contracts before the activity appeared.

Those puts traded for $3.40 today, more than doubling in value. The stock dropped 34.2 percent in the same time frame, a large move but nowhere near that of the options.

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.

EMES fell 15.31 percent today to close at $6.75, about half an hour after hitting a new 52-week low of $6.61. The fracking-sand producer is scheduled to report earnings before the market opens on Aug. 3.