Bears score big gains in $MIK

Option traders have more than doubled their money on downside positions in Michael’s (MIK).

On March 14, Investitute’s proprietary programs flagged the purchase of 2,000 June $15 puts for $2.80 with shares at $12.55. This was clearly fresh buying, as open interest in the strike was only 154 contracts before that session began.

Those puts traded for $6.90 today, about 2.5 times their purchase price. The stock dropped 35% in the same time period, 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.

MIK was down 0.12% to $8.17 today after hitting a record low of $7.78 in the previous session. The arts and crafts retailer missed sales estimates and cut its full-year outlook yesterday morning.