A big spike in bearish option volume for retailer Chico’s (CHS) is a curious sign that either signals hedging by past sellers, or a new bearish view on the stock by option traders, writes Beth Gaston of Schaeffer’s Research.

Put sellers who made a bet on Chico's FAS, Inc. (CHS) at the beginning of the month are sitting with a slight loss and may be heading for the exits. On June 1, a block of 4,000 CHS November 12-strike puts traded at the bid price of $0.75, suggesting they were sold to open.

At the time, CHS was trading at $14.18 and a sold out-of-the-money put wagered that CHS would stay afloat above the $12 level through November options expiration. Typically, put selling occurs over a shorter time frame, but perhaps these speculators targeted a later month to increase the premium collected.

Today, with the stock trading below $14, the puts have increased in value. If the trader who initially sold these puts to open is now buying them to close, he is doing so at a modest loss. We may be seeing this happen, as 3,000 puts have traded at the same November 12 put. Overall put volume on the women's apparel chain is nine times greater than usual, with almost 4,000 put contracts crossing the tape.

The November 12 puts have largely traded at the mid, or ask price, suggesting they are on the buy side. The average price has been $0.87, so if they are being closed by the original put seller, he or she is down 12 cents, or 16%, from the original price. It's also possible that an entirely unrelated trader is purchasing new long puts; the next open-interest translations will provide the answer.

In the past 50 days, CHS traders have shown an increased interest in long put options. Specifically, 89 puts have been bought to open across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) for every 100 calls. This is in the 78th annual percentile, meaning put volume is appreciating at a faster clip than normal.

Meanwhile, analysts are relatively sanguine toward CHS, awarding eight "strong buy" and nine "hold" ratings (no "sells"). The average 12-month price target for CHS on Wall Street is $17.38, more than 26% above current levels.

After enduring a long decline that took the shares more than 95% lower from February 2006 to November 2008, CHS has settled into a range-based pattern. Since mid-2009, CHS has been sandwiched between roughly $8 and $17, with its 160-week moving average bracketing the lower end of this consolidation pattern.

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Analysts may be looking for the shares to ultimately resolve this to the upside (albeit by just about 38 cents), while some options players are turning bearish via put options.

By Beth Gaston, contributor, Schaeffer’s Research