Bears profit from $SNAP’s losses

Poor quarterly results from Snap translated to big profits for downside option traders today.

On April 3, Investitute’s proprietary programs flagged the purchase of 2,839 May $13 puts in one print for $1 with shares at $14. This was clearly a new position, as volume was more than double the strike’s open interest of 1,258 contracts.

Those puts traded for $2.11 today, more than twice their purchase price. The stock dropped 27.9% in the same time frame, showing how 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.

SNAP plunged 21.94% to $11.03 today. The social-media company hit an all-time low of $10.96 after missing estimates on the top and bottom lines this morning.