Chewy Stock Lower Following Roaring Kitty Stake

Meme stock trader Keith Gill, who inspired the retail trading frenzy of 2021 and is better known as Roaring Kitty, pounced on Chewy Inc (NYSE:CHWY). According to a new U.S. Securities and Exchange Commission (SEC) filing, Gill bought 9 million shares, or a 6.6% stake in the pet e-tailer. This makes him the third-largest shareholder in CHWY, and at last glance, CHWY is down 5.6% at $25.72, reversing a 15% premarket gain.

The shares surged to a 2024 peak of $39.10 on Thursday, after Gill posted a picture of a dog on X. While the stock has cooled off from that rally, it's still trading above all long- and short-term moving averages. On track for its fourth consecutive day in the red, CHWY still added 43.8% in the last nine months. 

Short interest is rapidly unwinding, down 12.2% in the last two reporting periods, but shorts remain in control. The 19.91 million shares sold short account for 15.3% of Chewy stock's available float.

Options volume is running at quadruple the intraday average volume, with 94,000 calls and 51,000 puts traded so far today. The most popular contract is the weekly 7/5 30-strike call, but new positions are currently being opened at the 40-strike call in that same series.

It's worth noting that the security tends to outperform volatility expectations -- a boon for premiums traders. In fact, CHWY's Schaeffer's Volatility Scorecard (SVS) ranks at an elevated 89 out of 100.