Puts fly while Spirit loses altitude

Bearish option traders turned big profits today as shares of Spirit Airlines continued lower.

On July 10, Investitute’s propretary programs detected the purchase of 3,500 August $50 puts bought for $1.22 as part of a bearish vertical spread with shares at $53.30. Open interest in the strike was only 233 contracts before the trade appeared, showing that it was a new position.

Those puts sold for $10.66 this afternoon, representing a profit of nearly 800 percent. The stock fell 26 percent in the same time frame, a large move but nowhere near that of the options.

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.

SAVE was down 0.9 percent today to close at $39.71. The discount airline gapped down from above $48 yesterday morning after its revenue outlook disappointed analysts.