IB Options Brief: Michael Kors Holdings, Ltd. (KORS) & Chico's FAS, Inc. (CHS)

Posted March 20th, 2012 by Caitlin Duffy in Unusual Activity

KORS ñ Michael Kors Holdings, Ltd.
The number of open options positions on Michael Kors Holdings, Ltd., as measured by open interest of 30,337 total contracts, is roughly 65.0% comprised of call positions. The preponderance of open KORS calls versus puts was heightened yesterday by one large transaction involving roughly 10,200 far out-of-the-money front month calls. The Company guided up its estimate for fourth-quarter earnings and said same-store sales are up nearly 36.0%. Shares in the name are down 0.30% at $45.19 today, however, on supply-chain concerns stemming from a move to a new distribution center and related delays in shipments to customers.

It looks like the large block of April $50 calls on Monday sold for a premium of $1.00 per contract. The calls were not marked as a spread and appear to have been sold outright. The trader selling the contracts may walk away with maximum possible profits of $1.00 per contract at April expiration as long as shares in KORS fail to rally above $50.00. The move lower in shares of the apparel and accessories retailer today already has the position working in his or her favor, as the call options could potentially be bought back this afternoon at $0.40 each for net profits of $0.60 apiece. As of 12:45 p.m., only 178 calls have changed hands at the April $50 strike. Overall options volume of 10,550 contracts in play on KORS today is roughly three times the 90-day average option volume of 3,505 contracts.

CHS ñ Chicoís FAS, Inc.
Womenís clothing and accessories retailer, Chicoís FAS, Inc., popped up on our ëhot by options volumeí market scanner this morning after a large number of call options changed hands in the front month. Shares in the Fort Myers, Florida-based retailer are up 3.2% at $15.57 just before 1:00 p.m. on the East Coast. Options volume on CHS is concentrated at the April $16 strike, where more than 5,900 calls changed hands against open interest of 1,162 positions.

The majority of the calls appear to have been purchased for an average premium of $0.40 apiece. Buyers of the options stand ready to profit should the price of the underlying rally another 5.3% to surpass the average breakeven price of $16.40 at expiration. Chicoís shares are up 40.0% year-to-date and last traded north of $16.40 in July 2011.

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