Call Options Hot as Wendy's Stock Hits Fresh Highs

WEN stock reached its highest point in over a decade

Dec 20, 2017 at 2:58 PM
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Call volume hit a 52-week high yesterday on fast food issue Wendy's Company (NASDAQ:WEN), due to heavy buying at the January 2018 17-strike call. Looking back over the past 10 days, this option is home to the largest increase in open interest, with more than 12,000 contracts added. The next closest strike, the January 16 call, saw only 578 options added to open interest. Those buying the WEN January 17 call were expecting the shares to rise on the charts in the weeks ahead.

But they likely didn't expect their bullish bets to pay off so quickly. The security has jumped 1.4% today to trade at $16.62, earlier touching a 10-year high of $16.98, following an upgrade to "outperform" from "neutral" at Wedbush. The brokerage firm also lifted its price target to $20 from $16, saying price increases and new delivery services will help increase same-store sales in 2017.

Amid this strong price action, WEN's January 2018 17-strike call is active again, and data points to selling activity. It would seem some call buyers are cashing out after making a quick buck on Wendy's.

Making the stock's recent run higher even more impressive is the fact it's come despite a sharp increase in short interest. Over the past two reporting periods alone short interest on the security has surged 44.3%, and these bears control 14.7% of the total float. Going by average daily volumes, it would take seven days for short sellers to buy back their shares.

The stock is up 23% in 2017, but there remain a number of skeptics among the brokerage bunch, too. For example, six of 14 analysts still have just "hold" ratings in place, and WEN shares have taken out the average 12-month price target of $16.47. As such, there's still room for upgrades and/or price-target hikes.


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