Bears clean up with $IRBT

Option traders racked up huge profits on downside positions in iRobot (IRBT) today.

On May 20, Investitute’s proprietary programs flagged the purchase of 2,000 August $90 puts bought for $9.28 to $9.50 as part of a bearish roll with shares at $90.07. There was no open interest in that strike before the trade occurred, showing that it was a new position.

Those puts traded for as much as $20.30 today, more than twice their purchase prices. The stock dropped 22.62% in the same time period, illustrating 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.

IRBT is down 18.28% to $73.25 in early afternoon trading. The maker of the automatic Roomba floor vacuum company lowered guidance after the market closed yesterday.