Bears score big as Chico’s drops

Chico’s FAS fell sharply on disappointing quarterly results today, providing huge returns on downside trades.

Back on Feb. 17, Investitute’s proprietary programs found that 2,400 August $13 puts were purchased in one print for $1.20 with shares at $14.05. Open interest in the strike was a mere 40 contracts before the trade occurred, showing that it was a new position.

Today those puts sold for $4.07, a gain of some 240 percent. The stock has plunged 36 percent in that time, a large move but still far less than that of the 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 dropped 11.27 percent to $9.84 today. The women’s apparel retailer missed profit and sales expectations while issuing disappointing guidance before the market opened.