Option Traders Believe Peloton's Woes Are Over As Stock Soars

Peloton Interactive Inc’s (NASDAQ PTON) stock gained traction Wednesday after JPMorgan analyst Doug Anmuth reiterated an Overweight rating on the personal exercise equipment maker and media company after quizzing its CFO Jill Woodworth.

The analyst believes Peloton’s announcement on Monday that it plans to build its first dedicated factory named Peloton Output Park in Ohio will negate any former supply chain issues. Anmuth also noted Peloton’s investment in a North American manufacturing facility demonstrates the company’s confidence that demand for its products will remain strong.

On Wednesday, Peloton opened higher and soared 10% on the day, moving toward an overhead gap left behind on April 19 when U.S. Consumer Product Safety Commission issued a warning to Tread+ machine owners and asked for the product line to be recalled.

A number of institutions believe the worst is over for the company and bet over $1.1 million Peloton is headed higher over the next weeks and months.

Why It’s Important: When a sweep order occurs, it indicates the trader wanted to get into a position quickly and is anticipating an imminent large move in stock price. A sweeper pays the market price for the call option instead of placing a bid, which sweeps the order book of multiple exchanges to fill the order immediately.

These types of call option orders are usually made by institutions, and retail investors can find watching for sweepers useful because it indicates “smart money” has entered into a position.

The Peloton Option Trades: Below is a look at the notable options alerts, courtesy of Benzinga Pro:

• At 10:12 a.m., Wednesday a trader executed a call sweep, near the ask, of 226 Peloton options with a strike price of $115 expiring on June 18. The trade represented a $26,442 bullish bet for which the trader paid $1.17 per option contract.
• At 11:01 a.m., a trader executed a call sweep, at the ask, of 400 Peloton options with a strike price of $120 expiring on July 16. The trade represented a $132,000 bullish bet for which the trader paid $3.30 per option contract.
• At 11:01 a.m., a trader executed a call sweep, near the ask, of 244 Peloton options with a strike price of $120 expiring on July 16. The trade represented an $81,740 bullish bet for which the trader paid $3.35 per option contract.
• At 12:06 p.m., a trader executed a call sweep, near the ask, of 206 Peloton options with a strike price of $120 expiring on June 11. The trade represented a $30,900 bullish bet for which the trader paid $1.50 per option contract.
• At 12:08 p.m., a trader executed a call sweep, near the ask, of 401 Peloton options with a strike price of $120 expiring on June 11. The trade represented a $62,155 bullish bet for which the trader paid $1.55 per option contract.
• At 12:19 p.m., a trader executed a call sweep, near the ask, of 220 Peloton options with a strike price of $140 expiring on Sept. 17. The trade represented a $103,400 bullish bet for which the trader paid $4.70 per option contract.
• At 12:20 p.m., a trader executed a call sweep, at the ask, of 250 Peloton options with a strike price of $140 expiring on Sept. 17. The trade represented a $118,750 bullish bet for which the trader paid $4.75 per option contract.
• At 12:20 p.m., a trader executed a call sweep, near the ask, of 250 Peloton options with a strike price of $140 expiring on Sept. 17. The trade represented a $119,000 bullish bet for which the trader paid $4.76 per option contract.
• At 1:01 p.m., a trader executed a call sweep, near the ask, of 200 Peloton options with a strike price of $150 expiring on Sept. 17. The trade represented a $63,000 bullish bet for which the trader paid $3.15 per option contract.
• At 2 p.m., a trader executed a call sweep, near the ask, of 550 Peloton options with a strike price of $135 expiring on July 16. The trade represented a $110,000 bullish bet for which the trader paid $2 per option contract.
• At 3:20 p.m., a trader executed a call sweep, near the ask, of 206 Peloton options with a strike price of $100 expiring on June 18. The trade represented a $260,590 bullish bet for which the trader paid $12.65 per option contract.

PTON Price Action: Shares of Peloton closed up 10.18% to $109.56 at market close Wednesday.

(Photo: Peloton Interactive)