$CPRI bears double money

It took less than a week for option traders to turn big gains on downside positions in Capri (CPRI).

On May 24, Investitute’s tracking systems found that 3,000 Weekly $39 puts expiring this Friday were bought for $2.05 with shares at $39.42. This was clearly a new position, as open interest in the strike was only 199 contracts before the activity appeared.

Those puts traded for as much as $4.52 today, more than twice their purchase price. The stock dropped 12.35% in the same time frame, illustrating 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.

CPRI was down 9.85% to $35.06 today. The London-based apparel retailer, whose brands include Michael Kors, Jimmy Choo, and Versace, fell after issuing weak guidance before the market opened this morning.