Bears make a killing as $FOSL plunges

Downside option positions have reaped enormous profits as Fossil trades at its worst level in 16 years.

On July 11, Investitute’s proprietary programs found that 11,900 September $9 puts were purchased for $0.60 to $0.75 wth shares at $10.12. This was clearly fresh buying, as open interest in the strike was only 1,048 contracts before the trades occurred.

Today those puts sold for $2.20, more than tripling in value. The stock plunged 32.7 percent in the same time frame, a huge move but still far less than that of its 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.

FOSL finished today down 0.42 percent to $7.15 after hitting $6.80 earlier in the session, its lowest price since 2001. The watch retailer plummeted after lowering its outlook on Aug. 8.