WTW call options are flying off the shelves
Weight Watchers International, Inc. (NYSE:WTW) stock is among the best of the S&P 500 Index (SPX) today, after Oprah Winfrey -- a major WTW stakeholder -- fueled speculation about a serious presidential bid in 2020. Against this backdrop, WTW shares were last seen 13.3% higher at $53.14, on pace for their best day since an early November post-earnings bull gap. What's more, Weight Watchers options are flying off the shelves.
WTW has seen roughly 12,000 calls change hands so far today -- five times its average intraday pace, and set for the 96th percentile of its annual range. Meanwhile, the stock's 30-day implied volatility (IV) skew of 3.9% is in just the 4th percentile of its annual range, suggesting WTW put options have rarely been cheaper relative to short-term calls.
The January 2018 52.50- and 55-strike calls are most popular, followed by the deep out-of-the-money April 60 call. "Vanilla" buyers of the January calls expect Weight Watchers stock to extend its trek higher through the next couple of weeks, while buyers of the April calls see WTW shares north of $60 -- territory not charted since 2012 -- by April options expiration.
There's a chance, however, that the April 60 calls are being purchased by short sellers getting antsy. Short interest on WTW stock climbed 4.1% in the most recent reporting period, and now accounts for nearly 27% of the equity's total available float. In fact, at WTW's average pace of trading, it would take these bears nearly nine sessions to repurchase their positions. That's plenty of fuel for a short squeeze to drive Weight Watchers stock even higher.
Whatever the motive, now is an opportune time to strike on WTW's short-term options. The security's Schaeffer's Volatility Index (SVI) of 50% is higher than just 16% of all other readings from the past year, pointing to relatively muted volatility expectations being priced into WTW's near-term contracts. Plus, the stock's inflated Schaeffer's Volatility Scorecard (SVS) of 92 indicates the "Oprah stock" has handily exceeded options traders' volatility expectations in the past year -- a boon to would-be premium buyers.
On the charts, WTW stock has skyrocketed more than 347% in the past year, and touched a five-year peak of $54.47 after the aforementioned November earnings report. Today, the shares are within striking distance of taking out that peak, rallying as high as $53.72 earlier.