We all know that LinkedIn Corp (NYSE:LNKD) stock crashed big-time last week. And those who shorted LNKD stock before its earnings report will have made decent money. But just how rich can you get from the giant move in LinkedIn’s stock price?
Well, how does a return of 207,200% sound? No misprint.
To be more specific, I was looking at put options expiring last Friday, February 5. Put options give the owner the option (but not the obligation) to sell the underlying stock at the strike price before the expiration date.
Please see the table below that shows how much they moved that day.
As you can see, the price of put options with a strike price of $130.00 on LinkedIn stock skyrocketed 207,200%.
In other words, if you had spent $1,000 buying that put, you would have made $2.07 million on the trade.
Puts Expiring Friday, February 5, 2016
Data source: Google Finance
Things like this don’t happen that often. But if you look at what the underlying security is doing, the sharp move in option prices would make much more sense.
LinkedIn reported its quarterly earnings after the closing bell last Thursday. Both revenue and earnings beat expectations. But the company announced weaker-than-expected forward guidance. And that has sent LinkedIn stock shares tumbling in after-hours trading. (Source: “LinkedIn Announces Fourth Quarter and Full Year 2015 Results,” LinkedIn Corp, February 4, 2016.)
On Friday, the LNKD stock price tanked more than 40%. The plunge has wiped out more than $10.0 billion of LinkedIn Corp’s market cap. Ouch!