Puts Hot as Weight Watchers International, Inc. (WTW) Pops

Weight Watchers International, Inc. (NYSE:WTW) was up more than 16% earlier following the company's earnings report

by Josh Selway

Published on May 5, 2016 at 3:05 PM

Weight loss specialist Weight Watchers International, Inc. (NYSE:WTW) has a knack for making huge moves in recent months, thanks to a series of Oprah-related bursts. Today, the stock is riding the Oprah wave once again, trading 2% higher at $12.77 -- and earlier surged as much as 16.5% -- after the company reported better-than-expected first-quarter earnings, on top of its first year-over-year increase in subscribers since 2012. Despite the positive news and price action, WTW put options trading at an extremely accelerated rate.

More specifically, WTW puts are trading at nine times the average amount for this point in the day, with put volume arriving in the 95th percentile of its annual range. Most of the action has taken place at WTW's June 9 put. While it seems fair to assume new positions are being initiated, it's unclear whether traders are mostly buying or selling at this strike. 

Looking back, it's call buying that's been popular on Weight Watchers in recent months. The stock's 50-day call/put volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) of 3.68 ranks in the top quartile of its annual range. 

What's more, it seems WTW's recent history of wild price swings is being priced into its near-term options -- though, that's not surprising around earnings time. The stock's Schaeffer's Volatility Index (SVI) has jumped to 128% -- in the 71st percentile of its annual range. 

There are many skeptics outside the options pits, too. In fact, before it decreased slightly in the two most recent reporting periods, short interest peaked at an all-time high of 20.1 million shares in early March. Even now, at average daily volumes, it would take WTW shorts roughly 11 days to cover their positions. 

As mentioned, Weight Watchers International, Inc. (NYSE:WTW) has been known to make outsized moves in the past. For example, WTW has swung nearly 20% in the session immediately following earnings in the past eight quarters. Plus, the shares surged from around $7 per share to as high as $28.05 in a four-week time span after Oprah unveiled her stake in the company last October.

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