Option traders tripled their money in downside positions on TripAdvisor today.
On Oct. 10, Investitute’s proprietary programs cited the purchase of 3,000 November $43 puts for $3.30 to $3.53 with shares at $41.77. This was clearly fresh buying, as open interest in the strike was only 94 contracts before that session began.
Those puts traded up to $10.59 today, more than 3 times their original purchase price. The stock fell 22.5 percent in the same time period, showing 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.
TRIP plummeted 23.22 percent today to close at $30.35. The travel-review service dropped sharply after announcing weak revenues and guidance.