$TEVA bears log quick win

It took just one session for option traders to double their money on downside option positions in Teva Pharmaceutical.

Just yesterday, Investitute’s market scanners detected the purchase of 7,500 May $12.50 puts for $0.22 to $0.29 with shares at $17.94. This was clearly fresh buying, as open interest in the strike was a mere 92 contracts before the trades occurred.

Those puts sold for $0.47 just before today’s closing bell, more than twice their initial purchase price. The stock dropped 32.5% at the same time, a large move but nowhere near that of its options 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.

TEVA was down 1.06% to $12.10 today. Connecticut’s attorney general announced a lawsuit yesterday that accused the company and 19 other generic-drug makers of engaging in a “broad conspiracy to artificially inflate and manipulate prices.”