$SIX bears triple their money

Downside option position scored big gains today as Six Flags Entertainment plunged on poor quarterly results.

On Oct. 2, Investitute’s proprietary programs flagged the purchase of 2,200 November $70 puts for $4.10 to $4.40 with shares at $67.21. This was clearly fresh buying, as open interest in the strike was only 600 contracts before that session began.

Those puts traded for $15.90 today, more than 3 times their purchase prices. The stock fell 19.52% in the same time frame, illustrating how 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.

SIX dropped 16.01% to $53.30 today. The amusement-park operator missed earnings and sales estimates after the market closed yesterday.