Wal-Mart puts post major gains

Bearish option trades that expired this afternoon drew exponential returns as Wal-Mart Stores plummeted.

On June 6, Investitute’s scanners found that 4,978 June $79 puts were purchased for $0.79 as part of a bearish spread with shares at $78.90. Open interest in the strike was only 875 contracts before the trade occurred, showing that it was a new position.

Today those puts traded for $5.60, representing a profit of more than 600 percent in less than two weeks. The stock dropped 7 percent in the same time frame, highlighting 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.

WMT fell 4.65 percent to close at $75.24 today. The retail giant, along with supermarket operator Kroger, gapped lower this morning after Amazon.com announced its intent to buy Whole Foods Market for $13.7 billion.