Traders scored exponential gains today in downside options positions on Teva that were opened just one session earlier.
On Friday, Investitute’s proprietary programs found that 2,200 Weekly $17.50 puts expiring on Sept. 22 were purchased for $0.26 to $0.28 with shares at $17.87. Volume was well above the strike’s open interest of 227 contracts, showing that this was fresh buying.
Today those puts traded up to $0.82, triple their original price. The stock was down 5.7 percent at the same time, underscoring how quickly options can far outperform moves in 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.
TEVA dropped 6.13 percent to $16.99 today. The generic-drug maker fell despite announcing plans to sell its women’s health business for $1.38 billion.