Impinj pullback drives big profits for bears

The decline of high-flying Impinj has led to exponential gains for downside option positions.

On July 18, Investitute’s proprietary programs cited the purchase of 2,500 August $45 puts for $1.50 to $2.50 with shares at $53.70. These were clearly new positions, as open interest in the strike was only 123 contracts before the trades occurred.

Those puts traded for $11.31 today, representing an average profit of more than 465 percent. The stock plunged 37 percent in the same period, a huge move but still far less than that of the options on a relative basis.

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.

PI, which traded above $55 as recently as July 27, dropped 8.09 percent today to close at $33.61. The identification-chip maker, whose tags are used to track inventory, plummeted last Friday with disappointing guidance.

The Seattle-based company rallied hard after announced plans to purchase Whole Foods Market, as investors speculated that Impinj’s products would be used in the expansion. Impinj went public in July 2016.