Juniper Networks dropped on poor guidance today, resulting in large profits on downside option positions.
Just yesterday afternoon, Investitute’s proprietary programs showed that 2,000 Weekly $29.50 puts expiring this Friday were purchased in one print for $0.59 with shares at $30.20. This was clearly a new position, as open interest in the strike was just 148 contracts before the trade occurred.
Today those puts traded up to $1.52, more than doubling in value less than 24 hours later. The stock was down 7.3 percent at the same time, underscoring how quickly options can far outperform 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.
JNPR fell 6.34 percent to $28.06 today. The network-equipment company beat quarterly estimates but issued a disappointing outlook after the market closed yesterday.