Shopping spree pays off for $CHS bears

Downside option positions in Chico’s FAS racked up big gains before expiring at today’s close.

Way back on Feb. 17, Investitute’s scanners detected the purchase of 2,400 August $13 puts in one print for $1.20 with shares at $14.05. This was clearly a new position, as open interest in the strike was just 40 contracts before the trade appeared.

Today those puts sold for as much as $5.13, a gain of more than 330 percent. The stock plummeted 42.8 percent in the same time frame, a huge move but still one that was far less than that of its 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.

CHS slipped 0.57 percent to $7.82 today. The women’s clothing company, which has plunged along with other mall retailers, is scheduled to report earnings before the market opens on Aug. 30.