Bears post fast profits in $ZUMZ

It took just one week for option traders to doubled their money on downside positions in Zumiez.

On March 8, Investitute’s tracking systems detected the purchase of 2,750 March $25 puts bought for $1.25 to $1.80 with shares at $25.09. Open interest in the strike was only 249 contracts before that session began, showing that this was fresh buying. Investitute co-founder Jon Najarian cited the unusual activity at that time in choosing ZUMZ puts as his final trade n CNBC’s “Halftime Report.”

Those expiring puts traded for as much as $2.90 today, twice their average purchase price. The stock fell 12.04% in the same time frame, illustrating 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.

ZUMZ fell to $22 this morning before rebounding to close at $24, up 1.35% on the session. The youth-apparel retailer, which Pivotal Research had downgraded to “hold” from “buy” on March 11, initially fell after issuing guidance below analysts’ expectations last night.