Bears profit from $PVTL drop

Pivotal Software has plunged in the last week, returning big profits on downside option positions.

On Sept. 12, Investitute’s proprietary programs cited the purchase of 2,000 September $25 puts for $2.27 as part of a bearish spread with shares at $27.54. This was clearly a new position, as open interest in the strike was only 153 contracts before the trade occurred.

Those puts sold for $4.80 this afternoon, more than twice their purchase price. The stock dropped 26.62% in the same time frame, a large move but nowhere near that of its options.

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.

PVTL was down 5.11% to $20.22 today. The cloud-software company declined sharply a few hours after the Sept. 12 put buying after billings missed estimates in its quarterly report.