Weight Watchers Interational, Inc. (WTW) Option Bulls Bet On More Oprah Upside

Weight Watchers International, Inc. (WTW) is getting an Oprah-inspired lift, and option bulls are piling on

Dec 22, 2016 at 11:45 AM
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Weight Watchers International, Inc. (NYSE:WTW) calls are flying across the tape at an incredible pace, after the weight loss specialist revealed its new "Live Fully" ad campaign, which features shareholder and board member Oprah Winfrey. In the campaign, Oprah sings the praises of the Weight Watchers system, saying the program has given her the chance to lead a "fantastic and full life." As WTW's stock surges, call players are drilling down -- with volume on track to settle in the 98th annual percentile -- and a number of speculators are eyeing even more near-term upside.

WTW is currently trading up 14.4% at $12.04, though the shares are still down more than 56% from their December 2015 highs. Meanwhile, today's surge has WTW testing its 20-month moving average, which has contained the shares for all but one month of the past year.

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Against today's upbeat technical backdrop, calls are crossing the line at 24 times the average intraday pace, with 8,283 contracts traded. And while puts are also crossing at a faster-than-usual pace -- 14 times what's typically seen at this point of the day -- calls are still in the lead by a more than 3-to-1 margin. Drilling down, the weekly 12/23 11.50-strike call has seen notable attention, where it appears speculators are buying to open the calls, betting on WTW to extend its lead north of the strike through expiration at tomorrow's close.

Widening the lens, WTW's Schaeffer's put/call open interest ratio (SOIR) of 1.41 sits in the 72nd percentile of its annual range, indicating traders are more put-skewed than usual among options set to expire in three months or less. In fact, WTW's top front-month open interest position is the January 2017 13-strike put, with 4,472 contracts outstanding.

Nevertheless, call buyers have been active in recent weeks, per WTW's 10-day call/put volume ratio of 115.43 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) -- which sits just 2 percentage points from an annual peak. The majority of this action has centered at the April 13 call, and given its out-of-the-money status, it's possible some of the activity is a result of short sellers hedging their bearish bets against any upside risk. short interest accounts for more than 50% of WTW's float, or 23.8 times the stock's average daily volume.

Regardless, near-term premium buyers are getting a relative bargain on WTW options. The security's Schaeffer's Volatility Index (SVI) of 49% sits in the 5th percentile of its annual range. This indicates the options market is currently pricing in low volatility expectations for Weight Watchers International, Inc.'s (NYSE:WTW) short-term options.

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