Why $VIAB put prices doubled

Bearish option traders posted large profits as Viacom dropped today.

On March 8, Investitute’s proprietary programs flagged the purchase of 4,000 April $32.50 puts for $1.30 to $1.50 with shares at $33.15. This was clearly fresh buying, as open interest in the strike was a mere 61 contracts before that session began.

Those puts traded for $2.65 today, more than twice their initial purchase price. The stock fell 8.6% 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 was down 3.7% today to close at $29.42. The media company’s shares fell after CBS submitted a buyout bid that was below market value.