$BABA bears score

It took only two sessions for bearish option traders to rack up huge gains in Alibaba (BABA).

Just this past Wednesday on Aug. 18, Market Rebellion’s Unusual Option Activity programs detected the the purchase of 3,000 Weekly $165 puts, expiring next Friday, for $1.99  as part of a bearish roll with shares at $174.58. Volume was clearly above the previous open interest of 1,648 contracts, indicating that this was a new position.

Those puts sold for as much as $12.21 today, over 6 times their purchase price. The stock fell 11% 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.

BABA was down 1.57% to close at $157.96 this afternoon, after setting a new 52-Week low of $155.50 for the Chinese e-commerce giant earlier in the session.