Weight Watchers International, Inc. (WTW) Bull Gap Sparks Upbeat Betting

Weight Watchers International, Inc. (WTW) could run even higher if bears start hitting the exits

Dec 30, 2015 at 10:26 AM
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Weight Watchers International, Inc. (NYSE:WTW) is going gangbusters this morning, up nearly 13% out of the gate at $21.84. While a specific catalyst is difficult to pin down, the bull gap may have something to do with Oprah Winfrey's recently released advertisements, which have been fueling the shares all week. Not surprisingly, call traders are on the prowl.

Diving right in, nearly 10,000 WTW calls are on the tape, or 13 times the expected intraday clip. One of the most active calls is the January 2016 21 strike, where buyers may be initiating positions to bet on extended gains through the close on Friday, Jan. 15, when the front-month series expires.

As for puts, the most active strike is the April 16 put. It appears traders are selling to open these contracts, expecting the out-of-the-money strike to act as support through April options expiration. WTW hasn't traded south of $16 since early November.

Despite the stock's impressive technicals and the upbeat betting witnessed in today's options pits, sentiment tilts in a bearish direction, looking at things more broadly. WTW's Schaeffer's put/call open interest ratio (SOIR) is a top-heavy 2.68, with puts nearly tripling calls among options in the front three-months' series. More significantly, this SOIR ranks in the 86th percentile of its annual range.

Also in the skeptical camp are analysts. Of the four brokerages covering WTW, three have doled out a tepid "hold" assessment. Meanwhile, close to 42% of the stock's float is sold short, representing 6.6 days' worth of pent-up buying power, at typical volumes.

From a contrarian perspective, the case could be made that Weight Watchers International, Inc. (NYSE:WTW) has room to run. Should option bears start hitting the exits, analysts issue upgrades, and/or short sellers rush to cover their positions, the stock could get an additional boost.


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