Bulls Blast Fitbit After Citron Says Stock Can Double

Surging FIT stock could be spooking short sellers

Jun 11, 2018 at 2:47 PM
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Fitbit Inc (NYSE:FIT) is surging today, after noted short seller Citron Research waxed optimistic on the wearable tech name. FIT stock was last seen up 14.5% at $7.27 -- pacing for its best day since last August -- and options traders are betting on even more upside in the near term.

Taking a closer look at that Citron Research note, the firm set a $15 short-term target for FIT -- representing expected upside of 106% from the stock's current perch -- and pegged the company as a potential takeover target. Citron highlighted several potentially game-changing moves by Fitbit -- including its partnerships with Google and Dexcom.

The reaction to this bull note has sparked a rush of activity in FIT's options pits. Most recently, 89,000 calls were on the tape -- a new annual high -- compared to 17,000 puts, with total options volume also at a fresh 52-week peak, and running at 11 times what's typically seen at this point in the day.

The June 7 call is most active, with 21,000 contracts traded so far. All signs suggest new positions are being purchased here for a volume-weighted average price of $0.27. If this is the case, the goal is for FIT shares to break out above $7.27 (strike plus the premium paid) by this Friday's close, when the front-month options expire.

Earlier today, the stock topped out just above here at $7.32. And while today's surge appears to be running out of steam near the site of FIT's mid-December annual high, it's now up an impressive 61.6% from its early April record lows near $4.50.

fit stock daily chart on june 11

A continued round of short covering could certainly help propel Fitbit stock to new highs. Although short interest fell 11% in the most recent reporting period, there are still 28.5 million FIT shares sold short. This represents 14.9% of the stock's available float, or 5.3 times its average daily pace of trading.

 

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