Monday, February 14, 2011

Weight Watchers (WTW) - Earnings Bet Is On

WTW is trading $44.01, up 0.1% with IV30™ down 2.0%. The LIVEVOL® Pro Summary is below.


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WTW will be announcing earnings 2-17-2011 BMO. I saw a large bet on the upside and felt it was worth a note.

The company has traded 6,635 contracts on total daily average option volume of just 371. All but 1 (one) contract has been calls. The action is in the Feb 45 calls where nearly 5,500 have traded (substantially purchases). The Stats Tab and Day's biggest trades snapshots are included (below).

The Options Tab (below) illustrates that the calls are mostly opening (compare OI to trade size). When looking down the entire option chain for WTW, I don't see any OI larger than 1,499, so this trade is very large.

The Skew Tab snap (below) illustrates the vols by strike by month.

We can see the front month is elevated to the back which is normal into expo, and even more expected with earnings approaching. It is little odd to me that the 45 strike in Feb isn't bent upwards given the volume today that appears to be long. The vol in Feb is up 20 points.

I've included some Earnings stats for the last eight quarters in WTW. This information is available to Livevol Excel Premium subscribers.

We can see that WTW options are generally priced pretty fairly into earnings because the straddle has gone up in value 3/8 times and down in value the other 5/8. I also note that WTW absolute price change on average is $2.16.

Finally, the Charts Tab (6 months) is below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

We can see the stock has steadily climbed over the last 6 months. On the vol side (bottom), we can see the IV30™ has really exploded past the long-term and short-term realized. Bottom line, this feels like an earnings bet to me. Given that stock volume is 6x the average, these calls may be done with stock (and therefore turned into puts), but -- I don't see a large print at or around the time of the largest option trade.

The largest stock trades occurred at 9:52 EST and 9:44 EST - in total 400k shares, but the two trades look like opposite sides of each other (one purchase and one sale)

This is trade analysis, not a recommendation.

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1 comment:

  1. Great Call!

    Bad News:

    I got lulled off to sleep and sold my long call pre earnings. So I missed the explosion. Also the Live vol program: skew,vols takes long time to learn.

    Good news,

    You guys are unique.I'm glad I've rediscovered

    your service .