Bearish option positions scored stratospheric gains after Dick’s Sporting Goods reported poor quarterly numbers this morning.
Last Tuesday, Investitute’s proprietary programs found that 1,900 August $34 puts were purchased for $0.45 to $0.50 with shares at $37.62. Open interest in the strike was just 318 contracts before the trades occurred, showing that this was fresh buying.
Those puts ended today’s session trading for $7, representing a profit of more than 13,000 percent a week later. The stock dropped 28.3 percent in the same time frame, underscoring how 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.
DKS plunged 23.03 percent to $26.87 today. The sporting-goods retailer missed quarterly estimates and lowered its outlook before the market opened.