Weight Watchers Option Bulls Hope for President Oprah

Speculation is swirling that WTW stakeholder Oprah Winfrey could be eyeing a 2020 presidential bid

by Andrea Kramer

Published on Jan 8, 2018 at 1:46 PM

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.

Ditch These Bank Stocks Before the Fed Rate Hike
Wall Street is pricing in a rate hike from the Fed on Sept. 26
Put Options Pop on Ascena Retail Stock Before Earnings
ASNA broke above the $2.40 ceiling this past May
Bullish Options Signal Says Garmin Has Room To Run
The GPS maker nabbed a 10-year high earlier today
From Schaeffer's Pro Traders
Weekly Options Secrets Revealed

Direct from our Schaeffer's traders, your FREE guide to winning with weekly options!


Partnercenter


NEW! Explore Schaeffer’s Partners' deals and get connected to top online brokerages with deals tailored exclusively for our readers.  Get answers to your questions regarding transfer fees, commission rates, programs and available discounts related to online trading services.

MORE | MARKETstories


How to Transform Technical Indicators
How you can transform lagging indicators into leading indicators.
Cape Fear Flooding Drops Duke Energy Stock
The utility company said a dam breached at a North Carolina power station
Dow and S&P Cruise to Record-Breaking Weeks
Tech stocks prevented the Nasdaq from exploring its own record high
How to Transform Technical Indicators
How you can transform lagging indicators into leading indicators.