Options Bears Blast Chewy Stock Ahead of Earnings

The stock has lost 60% in 2022

Digital Content Manager
Jun 1, 2022 at 12:23 PM
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Online pet supply retailer Chewy Inc (NYSE:CHWY) will post its fiscal fourth-quarter earnings after the close this evening, and options bears are revving their engines ahead of the event. So far, 18,000 puts have exchanged hands, which is three times the intraday average, compared to 13,000 calls. The most popular contract is the June 25 put, followed by the weekly 6/3 27-strike call. 

This penchant for bearish bets isn't anything new for CHWY, though. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity sports a 50-day put/call volume ratio of 1.00, which stands in the 72nd percentile of its annual range. In other words, options traders are picking up long puts at a quicker-than-usual clip. 

The stock's Schaeffer's put/call open interest ratio (SOIR) of 1.20 echoes this, as it sits higher than 74% of readings from the past year. In other words, short-term options traders have rarely been more put-biased. 

Short sellers, on the other hand, have been hitting the exits in droves, down 20% in the last two reporting periods. However, the 10.42 million shares sold short make up a hefty 23.5% of the stock's available float -- over four days' worth of pent-up buying power. 

CHWY has a history of post-earnings losses, which could account for some of this bearishness among options traders. During the last two years, all but one of its next-day returns have been negative, which includes a 16.1% drop during its latest report. CHWY has averaged a 7.8% post-earnings swing during this time period, regardless of direction, which is much smaller than the 24.3% move the options pits are pricing in this time around. 

CHWY was last seen down 5% at $23.56, as it travels back toward its May 24, two-year lows of $22.22. While the shares briefly rose above their 20-day moving average late last week, this trendline is once again acting as an area of pressure on the charts. For the year, CHWY has lost 60%. 

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