This is still a stock pickers market

BY ANDREW GIOVINAZZI

May 30, 2024

Yo Pit Crazies,

OP University founding membership is drawing to a close. Imagine getting Oxford University back in 1265 for life for a one time fee for 2 bits! Do it!

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In the fall of 2023 I got some Chewy Inc (Ticker: CHWY) shares for $21.70. I started writing 1 x 2 call spreads against the stock and watched it peak by the end of 2023 around $25. I figured it would be easy sailing and a few buy writes and short puts to run the wheel trade and I would be on Easy Street.

Well it did not work that way. The stock was as low as $16 a couple of days ago. I know because I was writing 1 x 2 put spreads for credits. Anything to generate some bucks until CHWY came back to life.

CHWY 1 year chart with 30, 60 and 90 day implied volatility

With the stock in the high 17s around $17.70 I did do something to goose up the leverage a bit. I think the stock was going higher and having my 500 shares sit around where I could not write any calls was annoying. The 1 x 2 put spreads were ok but the stock was not going anywhere either.

Let’s see what i did

I sold 500 shares and bought 20 calls

I had $8850 in share value when I sold my stock at $17.70. The delta on my 500 shares was only 500. When I bought 20 CHWY Oct18 20 calls for $2.10 I reduced my cost to $4200. I sold those calls today for $3.50, so I recovered way more than what I lost in the stock plus was able to buy new CHWY Jan2025 30 calls with house money.

It is a technique I use in OPMentoring/Pro when I am running the Div+ strategy. That way even though the stock did not get back to my entry price, which CHWY has not, I can still make some dough.

I think CHWY should be a mid-$30 stock next year and I added to my growth portfolio in January.

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To Your Trading Success,

-AG