Bearish option positions in Abercrombie & Fitch soared after the company said negotiations over a potential sale had collapsed.
On June 5, Investitute’s proprietary programs identified the purchase of 4,100 August $11 puts for $0.34 to $0.44 with shares at $13.07. These were clearly new positions, as open interest in the strike was only 443 contracts before the trades appeared.
Today those puts traded for as much as $1.67, a gain of more than 300 percent. The stock has dropped 26.6 in that same time frame, a large move but one that was dwarfed by that of the options.
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.
ANF plunged 21.13 percent to $9.59 today. Shares were slammed after the fashion retailer announced that it had halted talks with potential buyers.