Bears score big profits in $SKX

Skechers USA plunged on weak guidance, handing large gains to downside option positions today.

On Wednesday, Investitute’s proprietary programs flagged the purchase of 2,600 April $40 puts for $1.25 with shares at $42.47. This was clearly fresh buying, as volume was more than double the strike’s open interest.

Those puts traded for as much as $10.20 today, more than 8 times their purchase price. The stock fell 29.6% in the same time frame, a big 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.

SKX dropped 27.04% to $30.70 today. The show retailer missed bottom-line estimates after the market closed yesterday and forecast lower earnings than expected for the next quarter.