$BABA bears score large profits

Option traders scored large profits in just 24 hours on downside positions in Alibaba (BABA).

Just yesterday morning, Market Rebellion’s Unusual Activity Service flagged the purchase of 3,250 Weekly $190 puts expiring this Friday for $1.18 to $1.25 with shares at $195.00. This was clearly fresh buying, as open interest in the strike was only 2,598 contracts before that session began.

Those puts have traded for as much as $2.90 so far today, more than 2 times their original purchase prices. The stock fell 2.59% in the same time period, underscoring how 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.

BABA opened lower to $189.85 this morning but has retraced some of its losses, currently at $194.27 but still down 1.04% for the session. The Chinese e-commerce giant fell alongside other Chinese equities as trade concerns make their way into headlines again.