Bears double money in $GPS

Shares of The Gap (GPS) finished positive today, but not before downside option traders could notch one more win.

On May 28, Investitute’s proprietary programs flagged the purchase of 7,500 June $21.50 puts for $1.20 to $1.37 with shares at $21.59. This was clearly fresh buying, as open interest in the strike was only 406 contracts before that session began.

Those puts sold for $2.68 today, more than twice their average purchase price. The stock dropped 12.74 in the same time frame, illustrating how options can far outperform moves in their underlying shares on a relative basis.

It is the fourth winning put trade in the name posted on Investitute in the last month.

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 closed higher by 0.59% to $18.79 today. The apparel retailer lowered its full-year outlook after earnings and sales missed estimates on May 30.