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Option Clips: Weight Watchers, Arena, and The Men's Wearhouse

Reviewing notable options activity on Weight Watchers International, Inc., Arena Pharmaceuticals, Inc., and The Men's Wearhouse, Inc.

by 2/14/2014 2:08 PM
Stocks quoted in this article:

Two equities generating buzz on StockTwits today are dieting concern Weight Watchers International, Inc. (NYSE:WTW) and drug maker Arena Pharmaceuticals, Inc. (NASDAQ:ARNA). Retailer The Men's Wearhouse, Inc. (NYSE:MW), meanwhile, is also garnering unusual attention in the options pits. Here's a look at how traders have been aligning their speculative bets today.

  • Weight Watchers International, Inc. (NYSE:WTW) forecast full-year earnings below expectations, sending the shares to a near four-year nadir of $22.35 earlier today. The stock was last seen 25.9% lower at $22.66, and finds itself on the short-sale restricted list. Against this backdrop, bears are taking to the options pits to gamble on more downside for WTW. So far, the equity has seen roughly 34,000 puts change hands -- more than 10 times its average intraday put volume, and triple the number of WTW calls exchanged. More specifically, skeptics are buying to open the February 20 put, which will move into the money if WTW breaches $20 within the next week, before the contracts expire.

  • Arena Pharmaceuticals, Inc. (NASDAQ:ARNA), which makes weight-loss drug BELVIQ, is down 2.4% at $7.02. From a longer-term perspective, the security has rallied roughly 20% so far in 2014, yet option traders today are attempting to call a short-term top for the shares. More than 3,900 contracts have crossed at the March 8 call, 99% at the bid price, suggesting they were sold. Plus, volume exceeds open interest at the strike, underscoring our theory of fresh initiations. To retain the entire net credit from the sale, which represents the maximum potential profit on the play, the sellers need ARNA to remain south of $8 through March options expiration. ARNA hasn't toppled $8 since late June, though the stock rallied as high as $7.97 in mid-January.

  • Finally, it's been a rough Valentine's Day for The Men's Wearhouse, Inc. (NYSE:MW), which has shed 4.6% to $44.37. The company has been pursuing Jos. A. Bank Clothiers Inc (NASDAQ:JOSB), though its acquisition efforts were stifled by JOSB's deal to buy the Eddie Bauer brand. Nevertheless, it seems one options trader is gambling on an intermediate-term recovery for MW. The speculator bought to open a block of 5,000 May 50 calls, and helped fund the bullish position by simultaneously selling to open an equal amount of May 36 puts. By employing the split-strike synthetic long -- which simulates stock ownership -- the trader is expecting MW to rally north of $50 within the next few months.

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