Bearish traders score on $JD puts

Bearish option traders doubled their money today as JD.com fell to a new 52-week low.

Just yesterday, Investitute’s proprietary programs flagged the purchase of 10,400 January $28 puts for $1.72 with shares at $29.45. This was clearly a new position, as open interest in the strike was only 2,768 contracts before the trade occurred.

New purchasers of those January $28 puts paid up to $3.45 today, double their initial purchase price. The stock fell 11.68% in the same time frame, underscoring how quickly options can far outperform moves in their underlying shares.

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.

JD dropped 10.64% to $26.30 today. The Chinese e-commerce company’s shares continued their slide to new lows after news last weekend, questioning the conduct of its CEO.