Bulls gorge on Weight Watchers

Option traders have reaped huge profits as shares of Weight Watchers have gained more than 50 percent this year.

On April 19, Investitute’s tracking systems detected the purchase of 3,000 May $18 calls for $1.40 with shares trading at $17.65. These were clearly new positions, as open interest in the strike was only 281 contracts before that session began.

Those calls, which expired at the end of trading today, were sold for $7.87–a gain of more than 460 percent. The stock has rallied 47.7 percent in the same period, an impressive move but one that was still far below that of the options.

Long calls lock in the price where the stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

WTW surged 10.03 percent today, closing at $26.01. The heavily shorted weight-loss program, which traded near $11 in early January, company beat quarterly profit and revenue estimates on May 2.