Options Traders Target 2 Retail Stock After Earnings

Both stocks carry hefty year-over-year deficits

Deputy Editor
Dec 7, 2023 at 1:22 PM
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Shares of retail companies Chewy Inc (NYSE:CHWY) and Dollar General Corp (NYSE:DG) are both moving lower this afternoon following their respective quarterly earnings reports, and both equities are seeing unusual intraday options volume as well.

For Chewy stock, it was last seen 2% lower at $18.96, though it earlier fell as low as $16.86 after the pet products e-commerce company reported losses and revenue for the third quarter that fell short of analysts' forecasts. What's more, Chewy provided net sales guidance for the fourth quarter that was lower than the expected $2.93 billion.

In response to the event, 80,000 calls and 68,000 puts have exchanged hands so far, which is six times the volume typically seen at this point. Traders are most interested in the weekly 12/8 16-strike put, though the 185-strike call from the same series is trailing close behind, with new positions being opened as well.

Today's dip is putting a dent in CHWY's 4.5% quarter-to-date lead. On a closing basis, the equity's 70-day moving average has kept a lid on any moves higher. Year over year, Chewy stock is down nearly 54%.

Dollar General stock is more modestly lower, last seen down 0.5% at $133.36. Though the discount retailer beat third-quarter earnings estimates and held up its full-year guidance, the company's recently restated CEO Todd Vasos expressed discontent with Dollar General's performance. In a statement, Vasos said that "we are not satisfied with our financial results for the third quarter, including a significant headwind from inventory shrink..."

Call traders seem undaunted by the comments, however. At the session's halfway mark, 24,000 bullish bets have been traded. When paired with the 17,000 puts that have crossed the tape at this point, total intraday options volume is running at five times what normally seen. New positions are opening at the top two most popular contracts, the respective weekly 12/8 135- and 145-strike calls. 

On the charts, Dollar General stock is still recovering from an early October dip to nearly five-year lows just above the $100 mark. Recently, however, DG crossed above long-term pressure at its 100-day moving average, though it remains down 46.4% year over year.


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