Bulls take a bite out of $CHWY

Bulls doubled their money in upside option positions on Chewy (CHWY) today.

On Nov. 19, Market Rebellion’s Unusual Activity Scanners identified the purchase of 3,800 December $22.50 calls for $1.90 to $2.11 as part of a bullish spread with shares at $22.50. This was clearly a new position, as open interest in the strike was only 6 contracts before the trade occurred.

Those calls have traded for as much as $4.70 today, more than twice their original purchase prices. The stock rose 21.16% in the same time period, an impressive move but nowhere near the gains in its options.

Long calls lock in the price where investors can buy a stock, letting them position for a rally at limited cost with the potential for significant leverage. They carry less risk than owning shares because the most that can be lost is the price of the options no matter how far the stock might fall.

CHWY gapped higher this morning, currently up by 6.7% to $27.24. The online pet food retailer’s IPO lockup expired today.