Unusual Options Activity: Chewy (CHWY)

E-commerce pet supply retailer Chewy (CHWY) has been out of favor with the market in the past year, with shares down 60 percent. One trader sees a potential recovery in the first half of 2024.

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  • That’s based on the July $30 calls. With 227 days until expiration, 5,500 contracts traded compared to a prior open interest of 161, for a 34-fold rise in volume on the trade. The buyer of the calls paid $1.00 to make the bullish bet.

    Chewy shares recently traded for about $17.50, so shares would need to rise $12.50, or about 71 percent, for the option to move in-the-money.

    Chewy is near its 52-week low of $16.53, and has been there since October.

    Operationally, Chewy has had a mixed year.

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  • While not profitable, revenues have risen by 14 percent. And the company has more cash than debt on the balance sheet, which should allow it to move past its current slump.

    Action to take: Shares seem to be forming a base, and could make a bigger move higher from here in the months ahead, barring any negative earnings surprises. Investors may like shares here as a contrarian bet.

    For traders, the July $30 calls are inexpensive, and may never move in-the-money. However, shares could have enough of a rally for the options to see high double-digit gains or better.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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