Promising E-Commerce Stock for Options Bulls

The security is back above the 200-day moving average

Jul 28, 2021 at 11:17 AM
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E-commerce name Chewy Inc (NYSE:CHWY) has been climbing up the charts since Needham initiated coverage on the security with a "hold" rating. The equity now boasts an 82.2% year-over-year lead, and is back above the 200-day moving average, after the trendline capped the stock’s post-earnings moves in June. In other words, now may be the perfect opportunity to buy calls on CHWY.

CHWY WT Repost

A short squeeze could send Chewy stock even higher. The 12.87 million shares sold short account for a substantial 15.2% of the stock’s available float, or over three days’ worth of pent-up buying power. Meanwhile, though calls and puts are running neck and neck, with 97,000 calls and 91,000 puts exchanged across all expiries, the top two peak open interest spots are puts, as are six of the top seven spots.

Now looks like an affordable time to buy CHWY options. The stock's Schaeffer's Volatility Index (SVI) of 45% sits in the low 5th percentile of its annual range. Plus, the equity’s Schaeffer's Volatility Scorecard (SVS) ranks at 82 out of 100, indicating the equity has exceeded options traders' volatility expectations during the past year. Our recommended call has a leverage ratio of 4.9, and will double in value on an 20% rise in the underlying equity.

Subscribers to Schaeffer's Weekend Trader options recommendation service received this CHWY commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.

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