$BHVN puts triple in one day

Option traders are racking up exponential gains today on bearish option positions opened in Biohaven Pharmaceutical (BHVN) only one session earlier.

Just yesterday, Investitute’s proprietary programs flagged the purchase of 4,000 July $45 puts for $1.25 to $1.80 with shares at $60.85. This was clearly fresh buying, as open interest in the strike was only 101 contracts before that session began.

Those puts traded for as much as $5.21 today, about 3.5 times their average purchase price. The stock fell 30% at the same time, a large move but nowhere near that of its options on 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.

BHVN is down 22.94% to $44.20 in midday trading today. The stock fell after the drug company announced a $300 million stock offering.