By David Russell of OptionMonster
NEW YORK -- Chico's (CHS) dropped on a poor earnings report Wednesday, but the bulls came roaring back on Thursday.
OptionMonster's tracking programs detected heavy activity in the October 17 calls, with buyers initially paying 25 cents. Premiums steadily climbed and would more than double to 60 cents as nearly 20,000 contracts changed hands, more than 100 times the strike's previous open interest.
The long calls lock in the price where investors can buy stock in the retailer, letting them cheaply leverage a move higher. That way the traders know that they won't miss a rally and don't have to lock up as much capital as would by owning shares directly.
The bullish option activity was cited by OptionMonster co-founder Jon Najarian on CNBC's "Halftime Report" Thursday. The action came a day after heavy buying in the November 17 calls, which inflated more than 50% on Thursday.
Chico's shares gained 4.64% to $16, erasing the previous session's drop. Overall option volume was almost 20 times average Thursday, with calls accounting for a bullish 94% of the total.
Najarian owns CHS calls and shares; Russell has no positions in the name.