Nerves are on edge before Weight Watchers reports quarterly
earnings this afternoon.
The weight-loss company has burned investors several times in the
last year, gapping violently lower after three of its last four
earnings reports. The main problem has been weak attendance at its
optionMONSTER's Depth Charge monitoring system detected the
purchase of 2,240 May 42.50 puts, most of which priced for $2.65.
Volume was more than 5 times higher than the previous open interest
at the strike, indicating that new positions were initiated.
Puts lock in the price where investors can sell shares, which gives
strong inverse correlation to the stock
. If it falls just 10 percent to $38, they stand to earn a profit
of more than 60 percent. (See our
section for more on how bulls and bears can harness the leveraging
potential of options.)
WTW rose 0.5 percent to $42.38 yesterday but has lost more than 40
percent of its value in the last year. The shares are now close to
a key level that's been support several times since 2005, which
could be leading some chart watchers to expect a major collapse if
it gives way.
Overall option volume was 7 times greater than average in the
session, with puts accounting for more than 80 percent of the
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.
Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.