$RDFN bears make a killing

Option traders doubled their money today on downside positions in Redfin.

On March 26, Investitute’s market scanners identified the purchase of 5,250 May $20 puts for $1.55 to $1.60 with shares at $20.30. Volume was well above the strike’s existing open interest of 2,423 contracts, indicating that this was fresh buying.

Those puts sold for $3.10 today, twice their initial purchase price. The stock fell 17.24% in the same period, illustrating how options can far outperform moves in their underlying shares on a relative basis.

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.

RDFN was down 1.76% to $16.73 today. The real-estate company fell sharply after quarterly results last week.