Why $VIAB put prices are trading 6-fold

Bearish option traders posted large profits as Viacom (VIAB) dropped today.

On Tuesday, Aug. 13, Our market scanners flagged the purchase of 2,400 Weekly $28 puts expiring on 30August in one print for $0.30 with shares at $29.32. This was clearly fresh buying, as there was no open interest in the strike before that session began.

Those puts have traded for $1.85 today, more than 6 times their initial purchase price. The stock fell 10.98% in the same time frame, showing how quickly options can 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.

VIAB is currently trading down 2.47% today at $26.06. The media company’s shares have fallen after news on Tuesday afternoon that it and CBS (CBS) would combine in an all-stock merger.