$FTCH bears score a winner

Bearish option traders posted solid gains on downside positions opened in Farfetch (FTCH) during the middle of this week.

On Wednesday, Aug. 7, Investitute’s market scanners identified the purchase of 4,900 August $16 puts from $0.80 to $1.00 with shares at $17.33. Volume was well above the strike’s open interest of 1,593 contracts, showing that this was a new position.

Those puts have traded for as much as $5.20 so far this morning, or about 5 times times their average purchase prices. The stock has fallen 37.39% in the same time frame – a gigantic move but still nowhere near that of its options 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.

FTCH is currently trading at $10.44, 42.63% lower on the day. The online luxury fashion retail platform beat earnings expectations after the closing bell yesterday, though still operates with a loss per share.