Teva puts gain 14,000% in one day

Poor quarterly results from Teva Pharmaceuticals today handed stratospheric profits to bearish option traders.

Just yesterday, Investitute’s market scanners found that 10,100 Weekly $30.50 puts expiring tomorrow were purchased for $0.37 to $0.54 with shares at $31.20. Open interest in the strike was only 349 contracts against open interest of 349 contracts.

Today those puts sold for $6.90, representing an average gain of more than 14,000 percent barely 24 hours later. The stock dropped 25 percent at the same time, a large move but nowhere near that of the 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 plummeted 24 percent today to close at $23.75. The generic-drug maker missed quarterly expectations and lowered its full-year outlook this morning, citing lower prices.