BY ANDREW GIOVINAZZI 

September 10, 2023 

Each week, I’ll give an overview of a stock and Licia Leslie will follow that up with a chart analysis the next day. Bill Griffo will chime in with macro analysis and Andrew Giovinazzi will then finish out the week with a volatility breakdown.

Have a stock YOU want us to review? Email my team here. – Mark

Hey Traders,

I don’t know about you, but Chewy Inc (Ticker: CHWY) boxes are all over Maine.

The company recently reported earnings and the traders did not like the news very much. CHWY dropped after earnings to a recent low of around $22.5.

I’m used to post-earnings drops in implied vol, but CHWY was impressive. I had to check the sigmas to make sure it was right:

If you’re in Pro Pod 1, you would learn that sigma is the IV of the term.

Despite the dropoff post-earnings, there’s still an opportunity here.

Record Low IV and Stock Price at the Same Time

You can see why I had to check the prices. The IV drop was so nuts that I had to make sure it wasn’t a data anomaly:

Sure enough, that’s a sign the market is giving up on any upside – or downside for that matter – in the stock. So I sold some put spreads in the stock on Thursday.  I sell put spreads when I think they go out worthless or want to “wheel” the stock in my IRA.

Not all stocks are trades, per se; you just want to own them at lower prices, which is what options are made for. Options are one of our five Areas of Trading Mastery you can learn as an Option Pit Pro.

Even though the calls are dirt cheap, I need to see the stock go up before I do anything buying calls. If the put spreads provide me with good dollars, I can start looking at upside calls in the 6 to 9 month range … as long as the IV stays this low.

To Your Trading Success,

AG