Spread Trader Not Buying the Fitbit Inc (FIT) Bounce

One Fitbit Inc (FIT) options trader is betting against today's bounce

by Alex Eppstein

Published on Oct 19, 2015 at 3:10 PM

Fitness stocks are rallying amid Oprah Winfrey's $43.2 million investment in Weight Watchers International, Inc. (NYSE:WTW). Among the equities benefiting is Fitbit Inc (NYSE:FIT), maker of exercise-tracking wristbands. The shares were last seen 1.3% higher at $37.37, and option traders have taken notice.

Diving right in, FIT calls are changing hands at 1.9 times the expected intraday rate -- and nearly double the pace of puts. Around midday, it looks like one trader bought to open three blocks totaling 3,460 February 2016 30-strike puts near the prevailing ask price, and sold to open three matching lots of February 2016 45-strike calls closer to the bid price, in what appears to be a risk-reversal play. The transactions at both strikes were accompanied by stock trades totaling about 193,000 FIT shares, pointing to a delta-hedged trade.

One group that's decidedly bearish toward FIT is short sellers. In fact, during the most recent reporting period, short interest shot 21.6% higher, and now makes up 10.7% of the stock's total float.

On the charts, Fitbit Inc (NYSE:FIT) has been in decline mode since topping out at a record high of $51.90 in early August, losing 28%. While the shares have displayed strength today, they've lost momentum around their descending 60-day moving average, which rejected FIT's breakout attempt in mid-September.

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