$TRGP bears quadruple money

Downside option positions have racked up exponential gains as shares of Targa Resources have fallen.

On Nov. 15, Investitute’s proprietary programs flagged the purchase of 2,200 January $44 puts for $1.25 as part of a bearish spread with shares at $47.21. This was clearly a new position, as open interest in the strike was only 79 contracts before that session began.

Those puts ended today marked at $5.30, more than 4 times their purchase price. The stock fell 17.01% in the same time period, underscoring 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.

TRGP was down 4.36% to $39.07 today. The energy-pipeline operator has declined with the rest of the energy sector as the price of oil has dropped.