For bears, $FINL is gift that keeps giving

The Finish Line plunged for the second time this month, resulting in huge gains for downside option positions today.

On June 22, Investitute’s market scanners identified the purchase of 3,000 November $12 puts for $1.10 to $1.20 with shares at $12.69. This was clearly fresh buying, as open interest in the strike was only 110 contracts before the activity appeared.

This morning those puts traded as high as $4.84, representing an average profit of more than 320 percent. The stock plunged 45.2 percent in the same time period, a huge move but one that is still far below that of its options on a relative basis. It was the second winning put trade in The Finish Line posted on Investitute in less than two weeks.

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 plummeted 18.43 percent to $8.50 today. The athletic-apparel retailer, which had already dropped sharply after quarterly results on Aug. 18, fell further after lowering its outlook last night and adopting a “poison pill” strategy to avoid a hostile takeover.