Puts turn quick gains in $CHS

It took took less than as week for bearish option traders to double their money in Chico’s FAS.

Late in the afternoon on March 4, Investitute’s proprietary programs cited the purchase of 8,500 March $6 puts for $0.55 to $0.65 with shares at $5.95. This was clearly fresh buying, as open interest in the strike was only 425 contracts before the activity appeared.

Those puts traded for as much as $1.20 today, twice their average purchase price. The stock dropped 17.48% in the same time frame, illustrating how quickly options can far outperform their underlying shares 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 fell 6.03% to $4.99 today. The women’s apparel retailer is down sharply since issuing weak guidance before the market opened on March 6.