Why puts soared tenfold in $DBVT

DBV Technologies plunged today on disappointing drug data, resulting in exponential gains for downside option positions.

On Aug. 31, Investitute’s tracking systems detected the purchase of 4,000 November $60 calls for $3.20 and $3.30 as part of a bearish combination trade with shares at $44.05. This was clearly a new position, as volume was above the strike’s open interest of 3,099 contracts.

Those puts were marked at $32.35 today, a theoretical gain of more than 10 times its original purchase price. The stock dropped 35.7 percent in the same time period, illustrating how options can far outperform moves in 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.

DBVT plummeted 41.09 percent to $28.32. The biopharmaceutical company gapped lower at today’s open after its peanut-allergy treatment missed goals in late-stage clinical trials.