Puts skyrocket as Interpublic falters

Bearish option traders turned big profits today as Interpublic Group reported weak quarterly results.

On July 12, Investitute’s proprietary programs identified the purchase of 3,500 August $24 puts for $0.50 and $0.55 with shares at $24.62. Open interest in the strike was a mere 28 contracts before that session began, showing that this was fresh buying.

Today those puts traded for $2.39, representing an average gain of 350 percent. The stock fell 12.2 percent in the same period, illustrating 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.

IPG dropped 13.34 percent to close at $22.16 today after the advertising firm missed earnings and revenue forecasts this morning.