$PCG put buyers see 11-fold gains

Bearish option traders scored huge gains as shares of PG&E plummeted today.

On Oct. 31, Investitute’s proprietary programs flagged the purchase of 5,000 November $46 puts for $1.18 as part of a bearish roll with shares at $47.15. Volume was well above the strike’s open interest of 3,948 contracts before that session began, showing that this was a new position. Investitute founder Jon Najarian cited the huge volatility in PCG options as the stock dropped today on CNBC’s “Halftime Report.”

Those puts sold for $13.23 just before today’s closing bell,  more than 11 times their purchase price. The stock dropped 30% in the same time frame, a large move but still 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.

PCG plummeted 17.38% to $32.98 today. The utility company’s shares fell sharply on speculation that it might be responsible for Northern California’s wildfires.