Call Buyers Flock to Fitbit Inc (FIT) on Strong Earnings Outlook

Fitbit Inc (NYSE:FIT) is moving higher today, after Morgan Stanley predicted the tech company will top first-quarter earnings expectations

by Josh Selway

Published on Apr 11, 2016 at 3:18 PM

Wearable tech stock Fitbit Inc (NYSE:FIT) is moving higher along with the broader stock market, after Morgan Stanley predicted better-than-expected first-quarter earnings from FIT (and not-so-great results for this athletic apparel name). "Our checks indicate demand for Blaze and Alta were ahead of expectations," said Morgan Stanley, "and retailers are already putting in re-orders for the Blaze..." Shares of FIT were last seen trading 4.1% higher at $15.10, which likely pleases many options traders. 

In fact, call buying has been extremely popular at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). The stock's 10-day call/put volume ratio across these exchanges shows that 5.62 FIT call options have been bought to open for every put option. Moreover, short-term options traders are decisively call-skewed, based on FIT's Schaeffer's put/call open interest ratio (SOIR) of 0.39. 

Call volume is accelerated today, too. One of the most popular options is the April 15.50 call, where traders are buying to open positions. By doing so, they're betting on FIT to rally above $15.50 before front-month options expire at this Friday's close.

In the meantime, short sellers have been covering their positions. During the most recent two-week reporting period, short interest on FIT fell by 21.5% -- though 15% of the stock's float is still sold short.

Looking at the charts, FIT has been trying to fill its late-February bear gap which helped send the shares to an all-time low of $11.91 on Feb. 24, but the $16 area continues to push back the shares. Nevertheless, the stock just closed above its 10-week moving average for a second straight week -- a level that sent FIT lower in late 2015 and early 2016.

Finally, the Morgan Stanley note isn't the only reason Fitbit Inc (NYSE:FIT) is buzzing today. Reports suggest a man's Fitbit device helped doctors in New Jersey save his life -- the first of such incidents for any wearable tech company. 

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