Bears profit from Zilllow’s pullback

Zillow has cooled after a torrid run this spring, and option traders have doubled their money in downside positions.

On July 7, Investitute’s market scanners identified the purchase of 2,000 July $48 puts for $1.85 with shares at $47.13. This was clearly a new position, as open interest in the strike was a mere 27 contracts before activity appeared.

Yesterday those puts traded for $3.74, more than doubling in value, before they expired at the end of the session. The stock fell less than 6 percent in the same time frame, showing how options can far outperform 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.

Z was down 0.29 percent to close at $44.43 yesterday. The home-buying information site spiked to a two year high of $51.12 a month ago.