Bears score big as $GPRO drops

Option traders doubled their money on downside positions in GoPro today.

On Oct. 23, Investitute’s market scanners proprietary programs cited the purchase of 6,000 November $7 puts for $0.71 to $0.84 with shares at $6.85. This was clearly fresh buying, as the strike’s open interest was only 977 contracts before the activity appeared.

Those puts traded for $1.55 today, twice their average purchase price. The stock plunged 19.71% at the same time, showing how far options can 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.

GPRO plummeted 24.23% today to close at $5.44. The video-camera manufacturer fell on disappointing guidance in its quarterly report after the market closed yesterday.