Bears score big profits in $GME

Option traders posted threefold gains on downside positions in GameStop today.

On Jan. 9, Investitute’s proprietary programs found that 14,000 Weekly $13 puts expiring on April 18 were purchased for $0.84 to $0.90 with shares at $16.10. This was clearly fresh buying, as open interest in the strike was only 248 contracts before that session began.

Those puts traded for as much as $2.55 today, about 3 times their average purchase price. The stock plummeted 30.5% in the same time frame, underscoring how options can far outperform moves in their underlying share 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.

GME plunged 27.23% to $11.28 today. Shares dropped after the game retailer said it has abandoned efforts to sell itself.