Does a sharp paper trader – with intimate knowledge of fall children’s fashion – know something we don’t?

If you look at today’s options transactions, it would definitely appear that way.

Here’s the scoop…

This afternoon, a very interesting trade crossed the tape on The Children’s Place (Nasdaq: PLCE).

Someone bought 2,897 of The Children’s Place October $75 puts for $1.04 million.

That’s a pretty sizable order.

But they weren’t quite done.

Moments later, 1,986 additional October $75 puts were bought for another $714,960.

So someone with rather deep pockets is now putting more than $1.7 million on the line – speculating that The Children’s Place will move lower between now and October 18.

Could this be a direct result of the Stitch Fix (Nasdaq: SFIX) earnings that we highlighted in yesterday’s Trade of the Day issue?

To circle back to that article, Stitch Fix reported earnings of $0.07 per share on revenue of $432 million. This was a big beat from the company, as the analysts at FactSet were expecting earnings of $0.04. Stitch Fix also reported a powerful 18% increase in active clients to 3.2 million.

All good, right?

Not so fast…

Stitch Fix issued Q1 revenue guidance in a range between $438 million and $442 million, which was far below the Wall Street expectation of $451.3 million. And just like that, the company reversed hard to the downside – moving 13% lower at today’s open.

While the correlation between Stitch Fix and The Children’s Place might be small, there’s a chance this big put buyer is using the negative reaction on Stitch Fix to prepare for a similar move on The Children’s Place.

Action Plan: From a chart perspective, negative retail earnings – combined with a weak market environment – could easily be the catalyst to trigger a retest of the August lows on The Children’s Place around $70. Combine those indicators with a heavy put buyer (noted above), and it all lines up for jumping on board and playing it lower. That’s exactly what we did today in The War Room.