Bears score quick in $PSTG

Option traders are posting large overnight gains on downside positions in Pure Storage (PSTG) today.

Yesterday on May 19, Market Rebellion’s Unusual Activity Service found that 3,400 May $25 puts, expiring today, were bought for $0.40 to $0.72 with shares at $25.36. This was clearly fresh buying, as open interest in the strike was just 1,261 contracts before the activity appeared.

Those puts have traded for as much as $2.50 today, over 3 times their purchase prices. The stock fell 11.47% in the same time period, underscoring how options can far outperform moves in their underlying shares 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.

PSTG is down 6.88% to $23.43 in late session trading.