Bears make a killing in $CHS

Downside option traders quadrupled their money in Chico’s FAS today.

On May 17, Investitute’s proprietary programs flagged the purchase of 2,100 June $10 puts for $0.40 and $0.45 with shares at $10.74. This was clearly fresh buying, as open interest in the strike was only 76 contracts before that session began.

Those puts traded for $1.70 this morning, more than 4 times their initial purchase price. The stock dropped 21.9% in the same time frame, a large move but nowhere near that of its options.

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.

CHS was up 3.55% to close at $8.46 today but shares plummeted 24% in the previous session. The women’s apparel retailer missed earnings estimates and lowered its outlook yesterday morning.