$PYPL puts score big in hours

Option traders who opened bearish positions in PayPal (PYPL) early this morning had quadrupled their money by the afternoon.

About 20 minutes into today’s session, Investitute’s market scanners showed that 3,400 Weekly $108 puts expiring on June 7 were bought for $0.77 to $1.16 with shares at $109.26. This was clearly fresh buying, as open interest in the strike was a mere 159 contracts before the activity appeared.

Those puts sold for as much as $4 in the last hour of trading, more than 4 times their average purchase price. The stock fell 4.38% at the same time, 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.

PYPL was down 3.85% to $105.52 at today’s close. Shares dropped this morning after the digital-payment system announced an e-commerce platform that is already used by Facebook (FB), which in turn fell sharply on news of a possible antritrust probe.