Put buyers win big in $EVH

Bearish option traders doubled their money on downside positions in Evolent Health today.

On Feb. 14, Investitute’s tracking systems cited the purchase of 10,250 March $15 puts for $0.70 to $1 with shares at $16.39. Open interest in the strike was a mere 26 contracts before the trades occurred, showing that this was fresh buying.

Those puts traded for as much as $1.87 today, more than twice their average purchase price. The stock fell 17.88% in the same time frame, illustrating how options can far outperform their underlying shares on a relative basis.

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.

EVH was down 4.09% to $14.07 today. The health-care services company missed fourth-quarter estimates after the market closed yesterday.