Traders betting against Peloton made $80 million amid the company's holiday-ad controversy

• Peloton short-sellers made $80 million in mark-to-market profits when the stock fell 9% Tuesday, according to data from financial-analytics provider S3 Partners.
• Before Tuesday's drop, traders had been exiting the short trade against Peloton, according to Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners.
• Now, Peloton short-sellers are up $39.4 million in December, S3 data show.
• Watch shares of Peloton trade live on Markets Insider.

Traders betting against Peloton stock got a break when shares plummeted 9% Tuesday amid controversy over a holiday ad the company released.

Short-sellers made $80 million in mark-to-market profits during the drop Tuesday, according to data from S3 Partners, a financial analytics firm.

Traders betting against the company were aided when negative sentiment over a holiday ad spurred the biggest single-day drop for Peloton since October. Even though the ad in question was released in November, social media backlash over the ad picked up this week and sent shares tumbling.

Before Tuesday, traders betting against Peloton had been covering shares, or exiting the short trade, Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners, told Markets Insider in an email.

Short-sellers bowed to pressure in recent weeks as Peloton's stock rose nearly 54% from the end of October through the stock's all-time high on December 2. Throughout the month of November, the number of shares shorted declined by 6.7 million, S3 data show. That includes traders that covered 163,000 shares in the last week, Dusaniwsky said.

Year-to-date, Peloton short-sellers are down $275.5 million in mark-to-market losses, according to Dusaniwsky.

Still, Tuesday's stock drop helped traders betting against Peloton recoup some of their losses. The group is up $39.4 million in December, Dusaniwsky said, including Tuesday's $80 million gains and Wednesday's slight loss.

Peloton now has $801 million in short interest on 23.93 million shares shorted, which is roughly 59% of its total shares outstanding, S3 data show.

Peloton shares are up almost 16% from their September IPO through Tuesday's close.