Puts post big gains in $CELG

Bearish option traders almost doubled their money in Celgene today.

On Jan. 10, Investitute’s market scanners identified the purchase of 5,000 March $75 puts for $1. The trade was part of a bearish spread with shares at $86.60.

Those puts traded for as much as $1.84 today, nearly double their purchase price. The stock fell 2.23% in the same time period, showing how options can far outperform moves in 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.

CELG was down 8.65% to $83.12 today. Shares declined after Wellington Management, an institutional investor in Bristol-Myers Squibb (BMY), said last night that it opposed the drug company’s proposed acquisition of Celgene.