Weight Watchers saw heavy call activity before yesterday before
issuing a mediocre earnings report after the close.
optionMONSTER's Heat Seeker tracking system detected the purchase
of about 4,800 April 80 calls for $6.40 and the sale of an equal
number of April 85 calls for $4 yesterday, resulting in a cost of
$2.40. Volume was below open interest at the lower strike, so there
are two possible interpretations for the activity.
One is that both parts were opening trades, in which case it was
bullish call spread
with the potential to earn a maximum profit of 108 percent if WTW
closes at or above $85 on expiration.
The other possibility is that an existing short position was rolled
to the higher strike. In that case, the investor probably owns the
shares and is using the options as part of a
strategy. Adjusting the position entitles them to collect an
additional $5 of upside on their shares. (See our
WTW is down 2.95 percent to $77 in morning trading after reporting
profit in line with analyst forecasts but revenue that was weaker
than expected. Its guidance was also mostly below consensus. The
stock has been bouncing in a range for the last year after a
dramatic move higher in February 2011.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.
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