$ATVI option bears score large profits

Bearish option traders are posting exponential profits in Activision Blizzard (ATVI) today, in positions opened toward the end of last week.

On Jul. 22, Market Rebellion’s Unusual Activity programs detected the the purchase of 14,650 Weekly $88 puts, expiring this Friday, for $0.56 as part of a bearish roll with shares at $90.23. Volume was clearly above the previous open interest of 677 contracts, indicating that this was a new position.

Those puts have sold for as much as $6.60 thus far today, more than 11.5 times their purchase price. The stock fell 9.41% in the same time frame, 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.

ATVI was last lower on the day by 7.45%  at $83.42. The game-developer saw coverage of its titles paused at video game outlets following labor environment allegations yesterday.