In the wake of its
well-received earnings report
Chico's FAS, Inc.
) is seeing speculators flock to its options pits. Total option
volume is running at quadruple the typical pace, with call volume
in the lead. More than 1,500 contracts have currently changed
hands, versus the 220 typically seen by this point in the trading
Garnering notable interest is the November 19 call, where 631
contracts have changed hands, trumping existing open interest of
417. All of the options have gone off at the ask price, pointing to
Factoring in the volume-weighted average price (VWAP) of $0.20,
breakeven for this position at expiration is $19.20 (strike price
plus VWAP). Even after the stock's 6.4% jump to $16.31 today, this
breakeven level is another 17.7% higher. Still, the option's delta
has advanced to 14% from 9.4% at last night's close, giving the
position a roughly 1-in-7 shot at expiring in the money.
Meanwhile -- with the uncertainty of earnings in the rearview
(IV) has imploded, lowering CHS option premiums across the board.
Specifically, the equity's 30-day, in-the-money IV is off 11.1
percentage points, or 27.2%, to 29.8%.
The women's apparel retailer earned 27 cents per share in the
second quarter, falling a nickel short of analysts' estimates.
Investors were cheered, however, by news that sales in the current
quarter are up 4.9%. As one analyst with Oppenheimer & Co.
observed, "it sounds like August results have bounced back and they
are coming positively." Today's bounce, in fact, has lifted the
shares back atop their 100-week moving average. Chico's closed
south of this trendline last week for the first time since early
This article by Beth Gaston was originally published on
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