Put prices surge 7-fold in $VIPS

Vips has dropped on poor quarterly numbers this week, handing exponential profits to bearish option traders.

On Monday, Investitute’s proprietary programs flagged the purchase of 1,895 May $13.50 puts for $0.20 with shares at $15.30. This was a new position, as there was no open interest in the strike before the trade occurred.

Those puts traded up to $1.41 today, more than 7 times their purchase price. The stock plunged 21.1% in the same time frame, showing how quickly options can far outperform moves in the 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.

VIPS was down 0.82% to $12.05 today. The Chinese discount retailer has fallen sharply since missing earnings expectations Monday evening.