$NTNX put prices rocket 8-fold

Bearish option traders booked enormous profits on downside positions in Nutanix today.

On Feb. 22, Investitute’s tracking systems cited the purchase of 10,000 March 52.50 puts for $2.70 with shares at $53.37 as part of a complex bearish spread. Open interest in the strike was a mere 1,158 contracts before the trade occurred, showing that this was fresh buying.

A few days later, on Feb. 25, another notably unusual bearish print hit the tape in the form of 10,000 March 50 puts bought for 2.35 above open interest of 1,469 contracts, as part of a bearish roll, apparently rolling down the position from the aforementioned trade, and capturing a 24% profit in the process.

The persistent and, now prescient, bearish trades performed outstandingly today, as those March 50 puts traded for as much as $16.70 today, more than seven times their average purchase price … while the March 52.50 puts traded to a high of $18.80 today, nearly seven times their purchase price. Including the calculated cost basis from the roll, the trader managed to squeak out a gain that effectively increased the original basis by over eight times the original cash outlay. The stock fell 36.8% in the same time frame, illustrating how options can far outperform 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.

NTNX was down 32.27% to close at $33.70 today. The hyper-converged infrastructure appliances and software-defined storage seller reported a worse-than-expected loss after the closing bell last night.