Under Armour fell sharply on poor guidance today, resulting in big gains for bearish option positions.
Only July 24, Investitute’s proprietary programs showed that 4,000 Weekly $20 puts expiring this Friday were purchased for $0.94 to $1.01 with shares at $20.21. This was clearly fresh buying, as open interest in the strike was just 632 contracts before the activity appeared.
Those puts sold for $2.01 at the end of today’s session, doubling in value less than 24 hours later. The stock fell 10.8 percent, illustrating how quickly options can outpace 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.
UAA dropped 8.59 percent to $18.30 today. The athletic-apparel retailer beat quarterly estimates but cut its full-year outlook before the market opened.