$X bears rack up quick profits

It took less than three sessions for option traders to double their money on downside positions in U.S. Steel.

On Oct. 24, Investitute’s market scanners identified the purchase of 5,000 November $25 puts for $0.79 to $0.81 with shares at $27.11. Volume was well above the strike’s open interest of 3,030 contracts, indicating that this was fresh buying.

Those puts traded up to $1.63, twice their purchase prices. The stock fell 4.51% in the same time frame, showing how quickly options can far outperform moves in their underlying shares.

It was the second winning bearish trade in X updated on Investitute this week. In addition, Investitute co-founder Pete Najarian has cited heavy buying in the November $24 puts on CNBC’s “Halftime Report” on Oct. 23, which are also winning.

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 was down 2.94% today to close at $25.75. The steel maker, which has traded lower with other industrial metals on fears of a slowing economy, is scheduled to report earnings on Nov. 1 after the market closes.