Lawsuit Dismissal Lifts Weight Watchers International, Inc. (WTW)

Oprah Winfrey is joining Weight Watchers International, Inc.'s (WTW) board of directors

May 12, 2016 at 12:58 PM
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Weight Watchers International, Inc. (NYSE:WTW) is rocketing higher today on a raft of headlines -- including the dismissal of a lawsuit claiming the weight-loss company defrauded shareholders. With the stock up 5.4% at $13.08, volume on call options has spiked to 1.6 times the usual intraday pace.

This is more of the same for WTW options traders. Across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open 4.80 calls for every put during the past 10 weeks. The corresponding call/put volume ratio rests a mere 1 percentage point from an annual high.

Of course, some of this may be the work of short sellers hedging. After all, 29% of WTW's float is dedicated to short interest, which would take over two weeks to cover, at the stock's average daily trading volume. That said, a capitulation among unhedged shorts amid another show of technical strength could send the shares even higher.

Taking a step back, it appears to be an opportune time to buy premium on short-term WTW options. The stock's Schaeffer's Volatility Index (SVI) of 67% ranks in the low 12th annual percentile. Likewise, WTW's Schaeffer's Volatility Scorecard (SVS) of 99 suggests the shares have made outsized moves in the prior year, relative to expectations in the options market.

On the charts, WTW has been see-sawing between $12 and $16 since early March. Notably, though, today's gains have the stock set to close above their 10-day moving average for the first time since April 19 -- which could be a bullish signal, going forward.

As alluded to, Weight Watchers International, Inc. (NYSE:WTW) is in the news today, beyond the aforementioned lawsuit dismissal. Specifically, according to a recent SEC filing, high-profile investor Oprah Winfrey has just won a two-year term as a director with the company. Plus, current WTW board member Denis Kelly purchased 10,000 shares on Monday.

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