Puts soar as Snap falls to IPO price

Snap plunged to the price of its initial public offering today, handing exponential gains to bearish option traders.

On May 9, Investitute’s market scanners identified the purchaes of 5,600 August $21 puts for $1.90 to $2 with shares at $22.70. Open interest in the strike was a mere 17 contracts before the trades appeared, showing that they were new positions.

Those puts traded for $5.40 today, nearly tripling in value. The stock fell 23.8 percent in the same period, a significant move but one that paled in comparison to that of the puts.

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.

SNAP fell 4.92 percent today to close at $17, the price of social-media company’s public debut in March.