The decline of high-flying Impinj has led to exponential gains for downside option positions.
On July 18, Investitute’s proprietary programs cited the purchase of 2,500 August $45 puts for $1.50 to $2.50 with shares at $53.70. These were clearly new positions, as open interest in the strike was only 123 contracts before the trades occurred.
Those puts traded for $11.31 today, representing an average profit of more than 465 percent. The stock plunged 37 percent in the same period, a huge move but still far less than that of the options 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.
PI, which traded above $55 as recently as July 27, dropped 8.09 percent today to close at $33.61. The identification-chip maker, whose tags are used to track inventory, plummeted last Friday with disappointing guidance.
The Seattle-based company rallied hard after Amazon.com announced plans to purchase Whole Foods Market, as investors speculated that Impinj’s products would be used in the expansion. Impinj went public in July 2016.