Bearish traders cross tape first at $FINL

Sales came up short at The Finish Line, resulting in huge profits for downside option positions.

On June 26, Investitute’s market scanners identified the purchase of 3,400 August $14 puts for $0.70 with shares at $13.99. Volume was well above the strike’s open interest of 2,498 contracts, indicating that this was fresh buying.

Those puts traded up to $3.80 today, a gain of more than 440 percent. The stock dropped 19.6 percent in the same time period, showing how options can far outperform 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.

FINL dropped 8.17 percent to $11.01 today. The athletic-apparel retailer plunged to a 52-week low of $10.49 minutes into the session after reporting poor quarterly results. Industry weakness was reflected in other leading names as well, including rival Foot Locker and Nike.