$WTW call prices skyrocket 18-fold

Weight Watchers blew past earnings estimates last night, resulting in astronomic gains for option traders today.

Last Nov. 13, Investitute’s tracking systems detected the purchase of 10,000 April $60 calls for $0.90 to $1.10 with shares at $42.74. Open interest in the strike was a mere 68 contracts before the activity appeared, showing that these were new positions. Investitute co-founder Pete Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls traded as high as $16.60 this morning, more than 18 times their original purchase price. The stock price soared 76.6% in the same time period, a huge move but one that still paled in comparison to that of its options on a relative basis.

Long calls lock in the price where investors can buy a stock, letting them position for a rally at limited cost with the potential for significant leverage. They carry less risk than owning shares because the most that can be lost is the price of the options no matter how far the stock might fall.

WTW rose to $77 early this morning, just off its 52-week high, but declined with the rest of the market and to end the session down 3.16% at $67.62. The weight-loss company topped quarterly projections with the success of its new “Freestyle” program, in contrast to poor results from rival Nutrisystem.