Chewy, Inc. (CHWY), Trending Stock Report

Chewy, Inc. (CHWY) is trending in the news and social media after the company announced earnings yesterday before the open. CHWY reported that customers were spending more on their pets. This caused CHWY to raise their full-year profit margin guidance and the stock jumped higher.

From an options trader’s perspective, short-term implied volatility fell from 220.31 down to 97.11 at the close yesterday. Short-term implied volatility expectations remain high this morning. This sets up a high probability trade for tomorrow’s expiration. CHWY has been good to us with similar high probability trades in the past.

This Volatility Term Structure chart for CHWY shows us the implied volatility for the at-the-money options for each expiration. Volatility expectations for tomorrow’s expiration fell from 220.31 yesterday, but they remained high at the close yesterday and this morning. Investors may be overestimating the potential moves of CHWY share prices. That provides us with another opportunity for a high probability put credit spread.

This MDM graph compares the modeled expected distribution for future stock prices (the orange line) with the actual distribution of the stock’s prices over the past year (the blue histogram). You can see that the actual stock movement does not match the expected. This graph tells us that the stock does not make large moves as frequently as modeled prices expect. That is good for option sellers.

CHWY announced earnings yesterday. While short-term volatility expectations fell after the report, they remain high enough for us to attempt another high probability trade. CHWY has been good to us in the past with this type of trade.

To get the specific details and prices on today’s trade ideas, be sure to read today’s ODDS Online Daily Option Trade Idea.