$RDFN bears quadruple money

Downside option positions in Redfin paid off substantially as shares fell today.

On July 26, Investitute’s proprietary programs flagged the purchase of 3,000 September $25 puts for $1.45 to $1.70 with shares at $25.36. This was clearly fresh buying, as open interest in the strike was a mere 9 contracts before that session began.

Those puts traded for $7 this afternoon, more than 4 times their purchase prices. The stock dropped 28.82% in the same time period, a large move but nowhere near that of its options.

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 plunged 22.39% to $17.96 today. The real-estate brokerage topped quarterly estimates but lower its revenue outlook after the market closed yesterday.