We Crushed the Earnings Game: 18-0!

August 1, 2023

I reviewed our Options Income Weekly July performance in the previous edition of Filthy Rich, Dirt Poor, noting that we closed out eight profitable trades in July. However, we managed to sneak in one more winner on July 31, bringing our monthly record to 9-0 with $303 in income generated per one contract sold.

As with our other July closeouts, our latest successful trade was on a speculative stock: online pet retailer Chewy (CHWY).

Here’s a look at our updated July results:

For our latest trade, we sold the CHWY 11 Aug 31 Put for $0.37, or $37 per contract. When we entered the position on July 25, we set a target exit price of $0.15. That price was hit just six days later, and we booked a profit of $22 per contract for a 0.7% return on the $3,100 in capital used to secure the sale of the put option.

Longtime Options Income Weekly members are very familiar with Chewy. We’ve traded it 19 times since early 2020. During that time, we’ve booked 18 winners and one loser, earning a total of $1,213 in cash with one contract sold.

A former pandemic darling, CHWY traded as high as $120 in February 2021 as pet ownership and spending surged. These days, shares trade in the low to mid-$30s thanks to concerns about slowing growth, rising costs and macroeconomic headwinds.

CHWY has struggled in 2023 despite investors’ renewed interest in growth stocks. Yet, the company continues to post solid results.

Chewy blew analyst estimates out of the water for the first quarter, reporting a surprise profit of $0.05 per share. Wall Street had been expecting a loss of $0.04. Revenue also beat expectations, rising 14.7% year over year to $2.78 billion.

Shares jumped more than 20% in a single day following the report, closing at $35.85 on May 31. By mid-June, they had run up to the $40 level. But that level failed to hold, and CHWY has since traded back down to the mid-$30s.

While Chewy’s growth may be slowing, it has beaten analysts’ earnings estimates by a wide margin in each of the past four quarters. The company is expected to report Q2 results toward the end of August.

Cautious investors may want to avoid holding a position through the announcement, as even another big beat does not guarantee the stock won’t sell off. But with four more expiration weeks between now and then, it’s very possible we will go back to CHWY with another trade soon.

Trade smart,

Emily Norris
Managing Editor
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