Weight Watchers International, Inc. (WTW) Calls Spike as Speculation Swirls

Weight Watchers International, Inc. (NYSE:WTW) is trading higher today, with some pointing to unconfirmed buyout or activist buzz

Oct 5, 2016 at 2:24 PM
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Weight Watchers International, Inc. (NYSE:WTW) is flying high -- trading up 6.5% at $11.30. While it's unclear what's moving the Oprah Winfrey-approved stock, some are speculating it could be due in part to buyout and/or activist rumors, or possibly a round of short covering. Whatever the reason, call players are joining in on the action, with volume running at five times what's typically seen at this point in the day in WTW's options pits.

By the numbers, 5,200 WTW call options have changed hands, compared to fewer than 250 put options. Most active is the stock's weekly 10/7 11.50-strike call, where it looks like new positions are being purchased. If this is the case, the call buyers' goal is for WTW to break through the $11.50 mark by this Friday's close, when the weekly options expire.

Considering more than 62% of WTW's float is sold short, there could be an ulterior motive to the activity being seen at this out-of-the-money strike. Specifically, short sellers could be hedging their bearish bets to protect against any additional upside through week's end.

Longer term, though, short sellers have been on the winning side of their bearish WTW bets. Since topping out at an annual high of $28.05 last November, the shares of Weight Watchers International, Inc. (NYSE:WTW) have surrendered nearly 60% of their value -- most recently pressured by a C-suite shakeup. And while the stock is surging today, it appears to be running out of steam near its 80-day moving average -- a trendline WTW has not closed north of since early June.

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