$X puts soar 6-fold overnight

Option traders are making a killing today on downside positions opened in U.S. Steel (X) only one session earlier.

Just yesterday, Market Rebellion’s proprietary programs flagged the purchase of 15,000 September $12 puts for $0.21 with shares at $12.16. This was clearly a new position, as volume was far above the strike’s existing open interest of 6,456 contracts.

Those puts traded for as much as $1.37 early today, more than 6.5 times their purchase price. The stock fell 12.42% at the same time, showing 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.

X is down 12.37% to $10.92 in morning trading. The steel maker lowered its outlook after the market closed yesterday.