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Market makers called the $CHWY earnings

The next morning follow up with Bryce on my options play with Chewy. Do I decide to lock in my 80% return?


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Chewy beat both on revenue and profitability the stock jumped overnight.

By Bryce

The bear case


Hitting the bid means offering what the market makers are currently offering.  This is to execute at a guaranteed price. Offering mid-market (between the bid and ask) often cuts down the ability for market makers to make a big profit. It also doesn't guarantee an execution.


The bull case


Exercising in-the-money happens when I let the options expire in-the-money. For each lot of options, I will result in buying 100 shares of the underlying stock (in this case CHWY) for the strike price. This is good for a long-term bullish bet on CHWY. However, it's important to note that 100 shares of CHWY will increase my margin requirement.


Take that $750 in the value of the position, or over $400 in profit and lock that in, and then roll it up. Rolling up means you buy a dollar cheap (options that are worth a dollar). So you take some of that $400 of profit to continue to bet on a bullish run on CHWY. The issue is that cheap options require a much higher break-even and so the stock really has to keep the momentum.


Expectations were met

Morning price action staying within the at-the-money straddle expected by Market Makers the day before.

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