Bears ring up gains in $GPS

Option traders have doubled their money on downside positions in The Gap (GPS).

On March 26, Investitute’s proprietary programs flagged the purchase of 8,500 June $27 puts for $2.68 to $2.90 with shares at $25.38. This was clearly fresh buying, as open interest in the strike was only 572 contracts before that session began.

Those puts traded for as much as $6.10 today, more than twice their purchase prices. The stock dropped 17.18% in the same time period, underscoring how options can far outperform moves in their underlying shares on a relative basis.

It is the second winning put trade in the name posted on Investitute in the last three weeks.

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.

GPS was down 2.53% to $20.83 today. The apparel retailer reports earnings tomorrow after the market closes.