$TRGP bears triple their money

Downside option positions have racked up exponential gains again as shares of Targa Resources have continued to fall.

On Dec. 19, Investitute’s proprietary programs flagged the purchase of 5,500 January $38 puts for $1.35 as part of a bearish roll with shares at $39.50. This was clearly a new position, as open interest in the strike was only 121 contracts before that session began.

Those puts traded for as much as $4.40 today, more than 3 times their purchase price. The stock fell 15.5% in the same time period, underscoring how options can far outperform moves in their underlying shares on a relative basis. It was the second winning downside trade with an exponential return in as many weeks in the name, cited by Investitute’s market scanners.

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 2.72% to close at $35.47 today. The midstream energy company’s shares have declined with the price of oil in recent weeks.