Bears print large gains as $DDD falls

3-D Systems has seen its stock price nearly cut in half in the last five months, resulting in exponential profits for downside option positions.

On July 26, Investitute’s proprietary programs cited the purchase of 5,000 November $15 puts in one print for $1.11 with shares at $17.13. This was clearly a new position, as volume was well above the strike’s open interest of 1,189 contracts.

Those puts traded up to $3.35 today, triple their purchase price. The stock plunged 31 percent in the same time period, underscoring how options can far outperform moves in 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.

DDD dropped 8.77 percent to $11.96 today. The 3-D printing company declined along with its rivals after Needham released an assessment of HP’s entry into the market next year, which was announced at an analyst meeting yesterday.