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.
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
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
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
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
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)
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