CALL OPTION ALERT: Chico's FAS… Really (CHS)

Posted in General 
July 2nd, 2008

Chico’s FAS Inc. (NYSE: CHS) rarely shows up on the more active stock trades out there. Frankly, this has NEVER made an options screen for the most actives. NEVER must be more finite than indefinite. Today we have seen a huge amount of options activity in Chico’s and it is actually one of the top movers and shakers on the CBOE options volume.

If you go out to the FEB09 $7.50 CALLS, there have been 10,401 contracts (as of 2:20 PM EST) that have traded hands today (on ask, last) in several trades. The open interest was a mere 160 contracts before today, so someone is making a leveraged and calculated bet. As a reminder, 10,000 contracts represents 1 million shares on a leveraged basis. There has been no corresponding PUT OPTION activity and this is nearly the combined open interest of all the put options and the call options (separate, not combined) with the traditional $5.00 and $7.50 strike PUTS that expire between now and February 20, 2009 (expiration date).

Sometimes the most exciting part of this entire job boils down to trying to get inside someone’s and trying to figure out what they are thinking. The old adage is that all investment decisions boil down to fear and greed. Sometimes it may boil down to other things after all.

Chico’s has been one beaten up stock. In fact, shares are down roughly 80% from their 52-week highs. It has fallen grossly out of favor. But one thing it still does is turn a profit and it is expected to keep turning a profit. It also has north of $1.50 net-cash per share (not including debt) and someone may be making a heavily leveraged and calculated bet that something is brewing here. February leaves more than 6 months for whatever this bet is to play itself out.

Interestingly enough, Chico’s common stock is down 4% at $5.24 on slightly under-normal trading volume (2.7 million shares vs. 3.88 million average daily share volume).

Jon C. Ogg
July 2, 2008

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