$SLB bears tap into gains

Bearish option traders are tapping into large gains on downside positions in Schlumberger (SLB) today.

On Feb. 24, Market Rebellion’s Unusual Activity Service flagged the purchase of 8,300 March $30 puts for $0.69 to $0.83 with shares at $31.38. This was clearly a new position, as open interest in the strike was a mere 996 contracts before that session began.

Those puts traded for as much as $18.30 this morning, more than 22 times their purchase prices. The stock fell 55.26% in the same time period, illustrating the kind of leverage that can be achieved with options.

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.

SLB dropped after the opening bell this morning to $12.91 before pulling back higher throughout the session to close at $17.31, still down on the day by 27.45%. The oil-services giant dropped as the price of crude fell after Saudi Arabia announced an increase of production.