$GME bears double their money

Downside option traders scored big today on disappointing quarterly results from GameStop.

On March 21, Investitute’s proprietary programs flagged the purchase of 6,800 April $15 puts for $1.40 to $1.52 with shares at $14.12. This was clearly fresh buying, as volume was far above the strike’s open interest of 3,372 contracts.

Those calls traded up to $2.80 this morning, twice their original purchase price. The stock fell 13.6% in the same time frame, showing how quickly options can far outperform moves in 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.

GME dropped 10.99% to $12.60 today. The game retailer’s earnings beat estimates last night but guidance was disappointing.