Bears double their money in Alder

Alder BioPharmaceuticals has fallen sharply after releasing mixed clinical data early this week, yielding huge profits for downside option positions.

On Monday, Investitute’s systems found that 2,700 July $15 puts were purchased for $1.30 to $1.75 with shares at $18.80. This was clearly fresh buying, as volume was well above the strike’s open interest of 1,178 contracts.

Those puts sold for $3.70 today, more than doubling in value. The stock plunged 39.2 percent in the same time frame, a huge drop but still far less than that of the options 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.

ALDR fell 4.58 percent to $11.45 today. The stock gapped down from $18.70 on Tuesday morning–the day after the July puts were bought–following mixed results for the drug company’s proposed migraine treatment Eptinezumab.