$ZM bears turn quick gains

It took just one week for option traders to double their money on downside positions in Zoom Video Communications (ZM).

On Oct. 15, our proprietary programs found that 3,800 Weekly $67 puts expiring this Friday were bought for $1.60 to $2.10 above open interest of 186 contracts with shares at $70.71. Market Rebellion co-founder Jon Najarian cited the unusual activity at that time on our proprietary chat service.

Those puts traded for as much as $4 today, more than twice their average purchase price. The stock fell 10.34% in the same time frame, showing how quickly 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.

ZM is down 3.53% to $63.45 this morning. Rosenblatt lowered its price target on the stock to $75 from $90 at the end of last week after the video-conferencing company held its analyst meeting on Oct. 15.