Medifast attracts bullish call spread

By
A A A

Medifast has been moving sideways for more almost a year, and now one investor is positioning for the heavily shorted weight-loss stock to rally.

MED optionMONSTER's Heat Seeker tracking system detected the purchase of 2,029 January 29 calls for about $2.38, matched against the sale of 2,029 January 33 calls for $1.16. Volume was more than 18 times open interest in both strikes.

The trade, known as a bullish call spread, cost $1.22 and will return a maximum 228 percent if MED closes at or above $33 on expiration.

The shares are down 2.5 percent to $26.18 in afternoon trading. They have been fluctuating widely on either side of $26 since November, dipping below $16 on Feb. 1 and pushing north of $38 in May.

The company, which sells low-calorie meals and dietary supplements, reported better-than-expected earnings and revenue on Aug. 5. It benefited from strong growth in direct sales through its "Take Shape for Life program," which provides health coaches to customers.

Short interest represented a substantial 16 percent of the float in mid-September. That could drive MED higher if bears are forced to cover, so today's call spread may have been the work of a short seller looking to hedge his or her position. (See our Education section)

Total option volume in the stock is 6 times greater than average so far today, with calls accounting for 96 percent of activity.

(Chart courtesy of tradeMONSTER)



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.


This article appears in: Investing , Options

Referenced Stocks: MED

optionMONSTER

optionMONSTER

More from optionMONSTER:

Related Videos

Stocks

Referenced

60%

Most Active by Volume

71,944,030
  • $102.34 ▲ 2.59%
58,365,447
  • $12.97 ▼ 7.36%
54,907,606
  • $16.575 ▲ 1.94%
39,225,105
  • $40.5807 ▼ 6.26%
35,843,889
  • $96.69 ▲ 2.44%
31,131,183
  • $9.295 ▲ 1.47%
27,597,447
  • $30.9399 ▲ 4.21%
24,582,734
  • $78.67 ▲ 2.24%
As of 10/21/2014, 02:41 PM

Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com