$SNAP put buyers quadruple their money

Bearish option traders are benefiting big time from Snap’s losses.

Back on May 9, Investitute’s proprietary programs cited the purchase of 5,600 August $21 puts for $1.90 to $2 with shares at $22.70. This was clearly new positioning, as open interest in the strike was only 17 contracts before the activity appeared.

Those puts traded up to $9.10 this morning, an average gain of more than 365 percent. The stock plunged 47.6 percent in the same period, a huge move but still far less than that of the 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.

SNAP dropped 13.59 percent to $11.83 today. The social-media company announced a wider loss than forecast while falling short of revenue estimates in its quarterly report after yesterday’s close.