$FSLY option bears score huge profits

Option traders have made huge profits on bearish positions in Fastly (FSLY).

Market Rebellion’s UOA Service flagged bearish option activity in the name ahead of its earnings report on two sessions over the past week:

–On Apr. 30, 3,900 Weekly, 07May expiring, $60 puts were purchased for $1.92 as part of a bearish spread above open interest of 643 contracts with shares at $65.65.

–On May. 4, 5,227 Weekly, 07May expiring, $55 puts were purchased for $2.35 above open interest of 3,466 contracts with shares at $59.29.

Those puts have traded for as much as $18.49 and $13.98 today, at least 9 and 5 times their respective purchase prices. The stock fell by as much as 36.83% in the same time frame, showing how options can far outperform their underlying shares.

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.

FSLY was last up 2.67% to $43.44 in morning trade. The cloud computing services provider missed earnings expectations Wednesday afternoon.