To The Moon

$Chewy, Inc.(CHWY)$ Chewy Inc. is an online retailer of pet products that has consistently beat analysts' expectations for net sales and has seen a growing active customer base. However, the stock can be very volatile following its earnings report, making it difficult to predict how the share price will react. As a result, selling options may be a profitable strategy to take advantage of the volatility of the stock.

Chewy's Stock Volatility

As mentioned, Chewy's stock can be very volatile following its earnings report. The stock closed down 16.1% the day after reporting Q4 2021 earnings. On the other extreme, the stock rallied 24.2% after reporting Q1 2022 earnings. Chewy will be released its earnings report after the market closes today.

Resistance and Support Levels

Based on the day chart below, the resistance level for Chewy shares is around 49, while the support level is around 31. With the stock closing yesterday at 39.88, this means the resistance and support levels are around 20% from the current trading price.

Selling Call Options

If Chewy's stock surges tomorrow and approaches its resistance level of 49, it may be profitable to sell uncovered call options at strike prices above 49 $CHWY%2020230331%2049.5%20CALL$ $CHWY 20230331 49.5 CALL$ . This is because the price of the call option will rise accordingly and the premiums collected can be somewhat significant. Chances are the option will expire worthless.

Selling Put Options

On the other hand, if the stock plunges tomorrow and approaches its support level of 31, it may be profitable to sell uncovered put options at strike prices below 31 $CHWY%2020230331%2030.5%20PUT$ $CHWY 20230331 30.5 PUT$ . This is because the price of the put option will rise accordingly and the premiums collected can be somewhat significant. I expect the option to expire worthless as well.

The Importance of Fed Interest Rate Decision and Powell's Speech

It's worth noting that the volatility of Chewy's stock tomorrow may be offset or further enhanced with the Fed interest rate decision and Powell's speech today. Therefore, it's important to monitor these events and adjust my trading strategy accordingly.

The Future of Chewy's Sales

While it is difficult to predict with certainty whether Chewy's sales will be affected by the post-pandemic period, the company has been successful in retaining its customers and expects its sales to reach nearly $9 billion for the year. Furthermore, pet ownership has been on the rise in recent years, with or without the pandemic, and is expected to continue to grow in the coming years. This could potentially offset any decline in sales due to fewer adoptions during the post-pandemic period. Additionally, Chewy has been using data and remote healthcare to capture the pet market, giving it an edge over its competitors.

Conclusion 

In conclusion, planning trades for Chewy shares after the earnings report can be a profitable strategy by taking advantage of the volatility of the stock by selling call and put options. By monitoring events such as the Fed interest rate decision and Powell's speech, I can adjust your trading strategy accordingly. Finally, the growth in pet ownership and Chewy's success in retaining its customers suggest that the company may continue to see growth in sales even after the pandemic.

 About Option Selling

• Selling options involves giving someone else the right to buy or sell an underlying asset at a specified price, called the strike price, on or before a specified date, called the expiration date.

• As the seller of an option, you receive a premium from the buyer in exchange for taking on the obligation to buy or sell the underlying asset at the strike price if the buyer chooses to exercise their option.

• Selling a put option involves selling the right to sell an underlying asset at the strike price, while selling a call option involves selling the right to buy an underlying asset at the strike price.

• Selling options can be profitable if the option expires without being exercised, allowing you to keep the premium without having to buy or sell the underlying asset.

• However, selling options also carries risks, as the buyer may choose to exercise their option if market conditions are favourable, forcing you to buy or sell the underlying asset at the specified price.

• It is important to carefully consider the risks and potential rewards of selling options, and to have a clear understanding of the underlying asset and market conditions before entering into any options transactions.

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