Unusual Options Activity: Chewy (CHWY)

Shares of online pet supply retailer Chewy (CHWY) have sunk nearly 40 percent over the past year, far underperforming the overall stock market. One trader sees the possibility for a strong rebound in the next few months.

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  • That’s based on the March $75 calls. With 70 days until expiration, 7,016 contracts traded against a prior open interest of 173, for a 41-fold surge in volume. The buyer of the calls paid $0.60 to make the trade.

    With shares right around $55, the stock would need to jump about 37 percent in the next two and a half months for the option to move in-the-money. That’s aggressive, but possible.

    Chewy didn’t make a profit last year, but revenue grew 24 percent in a though environment, and the company has more cash than debt on its balance sheet. With overall spending on pets rising, it’s likely that shares could easily rebound in the next few months.

    Action to take: Investors may like shares here, given how oversold they are. This is still a growth play overall, so buyers of the stock shouldn’t expect a dividend for some time.

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  • For traders, the $75 strike looks pretty reasonable compared to the stock’s 52-week high of $120 per share, and an $80 share price that existed in November before a big selloff. As a rebound play, the options are cheap enough to potentially deliver double-digit gains, even if the option doesn’t move in-the-money.


    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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