$UPS bears post 4-fold profits

It took just one week for option traders to run up exponential gains on downside positions in United Parcel Service.

On Dec. 12, Investitute’s proprietary programs found that 7,250 Weekly $99 puts expiring on Dec. 28 were purchased for $1.23 to $1.33 as part of a bearish spread with shares at $102.11. Open interest in the strike was a mere 22 contracts before the trade occurred, showing that this was a new position.

Those puts finished today’s session marked at $4.70, nearly 4 times their initial purchase price. The stock fell 7.63% in the same time frame, underscoring how quickly 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.

UPS was down 3.04% to $94.32 today. The package-delivery service fell after rival FedEx (FDX) missed quarterly estimates last night.