Bears quintuple money in $KPTI

Karyopharm Therapeutics (KPTI) continued to trade lower today following its earnings report earlier this month, turning large profits on downside option positions.

On Aug. 3, Market Rebellion’s Unusual Activity Service detected the purchase of 3,300 August $7.50 puts for $0.30 to $0.50 with shares at $8.29. Open interest in the strike was just 228 contracts before that session began, showing that this was fresh buying.

Those puts traded for as much as $2.90 today, at least 5 times their purchase prices.  The stock fell 44.27% in the same time period, a huge move but still nowhere near that of its options 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.

KPTI was down 2.47% to $4.73 at the close. The drug maker missed top line earnings estimates on Aug. 5.