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Options traders bet Chewy’s big gains will continue after earnings

Chewy has been nothing short of a trader’s best friend this year, with Tuesday’s gains bringing the stock’s return to about 75% in 2020. Gains like that will please just about any investor, and options traders are betting on the good times to keep rolling when the online pet supply retailer reports earnings after the bell.

“We saw calls outpace puts by about 3-to-1 in Chewy [Monday], and right now the options market is implying some pretty big moves by week’s end after they report earnings, moves of about 13% higher or lower,” Optimize Advisors CIO Michael Khouw said Monday on “Fast Money.”

Most of the sentiment in the options market pointed toward Chewy hitting the positive side of that implied move and breaking out to new all-time highs by the end of the week.

“We saw a lot of weekly calls trading,” said Khouw. “One of the ones I was looking at was the 50-strike calls. Those were trading for about $3.20. Buyers of those calls are obviously betting [Chewy is] going to finish the week above that $50 strike price by at least the $3.20 they paid.”

Buyers of those calls that expire after Friday’s close are betting on a move at least 9% higher from where Chewy closed Monday’s session. That’s shy of the 13% implied move, but still a very sizable move for a stock that has already rallied more than 100% off its lows of the year. 

Chewy was trading about 5% higher in Tuesday’s session. 

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