Pre-Earnings Call Players Take Aim at Weight Watchers International, Inc. (WTW)

Weight Watchers International, Inc. (NYSE:WTW) is up nearly 19% today, and call volume is popping

by Karee Venema

Published on Feb 19, 2016 at 12:26 PM

Oprah Winfrey-adored Weight Watchers International, Inc. (NYSE:WTW) is soaring today -- up 18.5% at $14.94. Boosting the stock is a report from Indiana University School of Medicine, which said the company's programs could be used as a "powerful tool" for those suffering from prediabetes -- just another in a recent string of positive endorsements for WTW. Against this backdrop, calls are crossing at 12 times the average intraday rate -- and outpacing puts by a nearly 8-to-1 ratio.

Drilling down, WTW's March 14 and 18 calls have seen the most action, and it appears as if one speculator could be initiating a long call spread in the soon-to-be front-month series. Elsewhere, a block of weekly 2/26 16-strike calls was opened, but with a wide bid-ask skew, it's hard to tell whether these calls were bought or sold.

Today's call-skewed session is just more of the same for WTW. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day call/put volume ratio of 7.75 sits in the 96th annual percentile, meaning calls have been bought to open over puts at a near-annual-high clip.

Echoing this call-heavy backdrop is WTW's gamma-weighted Schaeffer's put/call open interest ratio (SOIR) of 0.86. What this indicates is that near-the-money call open interest outweighs put open interest in the front three-months' series of options.

Looking elsewhere, short interest accounts for nearly three-fifths of WTW's available float. As such, it's possible some of the recent call buying -- particularly at out-of-the-money strikes -- is a result of shorts hedging against any additional upside. Since Oprah initially unveiled a stake in the company last October, shares of WTW have more than doubled.

Regardless, with Weight Watchers International, Inc. (NYSE:WTW) slated to step into the earnings confessional after next Thursday's close, it's getting pretty pricey to purchase premium on the stock's near-term options. Specifically, its Schaeffer's Volatility Index (SVI) of 143% rests in the 84th percentile of its annual range.

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