Puts keep paying off in $ALKS

Bears quadrupled their money in Alkermes today.

On Nov. 9, Investitute’s proprietary programs flagged the purchase of 5,000 December $35 puts for $1.30 with shares at $38.36. This was clearly fresh buying, as volume was well above the strike’s open interest of 2,639 contracts before the trade occurred.

Those puts soldfor $5.40 today, more than 4 times their purchase price. The stock fell 22.73% in the same time frame, underscoring how options can far outperform their underlying shares. It was the second winning trade in the name posted on Investitute in as many days.

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.

ALKS was down 0.43% to $29.76 today. Goldman Sachs downgraded the drug maker on Dec. 18 to “sell” from “neutral” and cut its price target to $26 from $49. A few sessions before that, Credit Suisse also lowered the name two notches to “underperform” from “outperform” with a $31 target.