$UNG put prices light up overnight

Bearish option traders turned a hefty profit today in the U.S. Natural Gas Fund on positions opened only 24 hours before.

Just yesterday, Investitute’s proprietary programs flagged the purchase of 50,000 Weekly $32 puts, expiring on November 23, for $0.30 as part of a bearish spread with shares at $39.05. Volume was well above the strike’s open interest of 167 contracts, showing that this was a new position.

Those puts traded for $1.66 during cash trade this afternoon, and for as much as $1.70 in the after-hours session, each more than 5.5 times their purchase price. The stock plunged 18.6% in the same time period, 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.

UNG dropped 19.15% to $31.79 today. The exchanged-traded fund gapped lower with natural gas futures this morning and continued to slip, as the newness of a shockingly early winter dissipated.