$TLRD bears triple their money

It took less than a week for option traders to post large gains on downside positions in Tailored Brands

On March 8, Investitute’s proprietary programs flagged the purchase of 5,600 March $12 puts for $0.80 to $1.15 with shares at $11.74. This was clearly fresh buying as open interest in the strike was only 953 contracts before that session began.

Those puts traded for as much as $3.43 this morning, 3.5 times their average purchase price. The stock dropped 24.87% in the same time frame, a large move but far below that of its puts, illustrating how options can far outperform 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.

TLRD plunged 25.24% to $8.74 today. The clothing retailer, whose brands include Men’s Wearhouse and Joseph A. Banks, missed quarterly expectations and issued guidance well below analysts’ estimate last night.