Option bears score in $PYPL

Option traders have scored on downside positions opened in PayPal (PYPL).

On Oct. 22, Market Rebellion’s Unusual Option Activity Service flagged the purchase of 6,000 Weekly $190 puts expiring this Friday, Nov. 2, for $2.92 to $5.15 as part of a complex bearish spread with shares at $204.59. Volume was above the strike’s existing open interest of 590 contracts, indicating that this was fresh buying.

Those puts have traded up to $15.60 this morning, at least 3 times their purchase prices. The stock fell 13.99% at the same time, showing how quickly options can far outpace gains 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.

PYPL was last lower by 2.93% at $182.25 this morning. The online payments company reported quarterly earnings last night, beating on its estimated top and bottom lines.