Chewy Options Market Signals Strong Bullish Bias Ahead of Earnings

Options traders are placing significant bullish bets on Chewy Inc. (CHWY) ahead of its upcoming earnings report on September 9, with call options trading at nearly nine times the volume of puts. This activity, particularly in long-dated contracts and complex spreads, suggests a strong expectation of a positive catalyst for the pet supply retailer's stock.

Heavy Call Volume Dominates Trading

Trading data from August 28 showed a clear directional tilt in the options market for Chewy. Key activity included:

• Total options volume reached 21,830 contracts.
• Call options accounted for 19,686 of those contracts, compared to just 2,144 put options.
• A standout trade was in the January 2027 $47.50 call, which saw 5,353 contracts change hands—more than 20 times its open interest, signaling fresh, long-term speculative buying.

Many traders are utilizing call spreads, such as the September $22.50/$27.50 and $25/$30 combinations. This strategy allows investors to position for a moderate stock price increase following the earnings release while capping both potential risk and reward.

Volatility Skew Points to Upside

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Market indicators for volatility further support the bullish thesis. While 3-month implied volatility dipped slightly to 54.15%, it remains elevated, which is typical before a major corporate announcement.

More telling is the options skew, which measures the relative demand for bullish calls versus bearish puts. The skew has risen, indicating that traders are paying a higher premium for upside exposure. This is a classic signal that the market is positioning for a potential rally rather than a decline.

Context and Analyst Expectations

This options activity comes as Chewy's stock has struggled, falling 45% over the past year to trade at $23.37 as of August 28. The bullish positioning may reflect a view that the stock is poised for a rebound.

The sentiment in the derivatives market aligns with the consensus on Wall Street. Analysts rate Chewy a "Strong Buy" with a mean price target of $30.55, representing more than 30% upside from current levels. For the September 9 report, the Street expects the company to post earnings per share of $0.18 on revenue of $3.32 billion.