Stifel downgraded Fitbit Inc (NYSE:FIT) to "sell" from "hold," with the brokerage firm saying a return to revenue growth next year could be a "high hurdle." Stifel went on to say that FIT's opportunity to develop and capitalize on new products within the digital health sphere has been "underwhelming to date." In reaction, FIT stock is down 5.4% to trade at $6.45 -- pacing for its biggest daily percentage drop since late July.
More broadly, Fitbit shares have been a long-term underperformer, and were already down 6.8% year-to-date heading into today's trading. And while the stock recently came off its mid-November lows near $5.80, this rally was stopped short near $7.20-$7.30 -- home to FIT's late-January pre-bear gap levels.
Options traders, meanwhile, have been initiating long calls over puts at a faster-than-usual clip in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), FIT stock's 10-day call/put volume ratio of 20.70 ranks in the 100th percentile of its annual range.
Now, it's likely that some of this call buying -- particularly at out-of-the-money strikes -- is a result of short sellers using options to hedge against any additional upside risk, considering nearly 15% of FIT's float is sold short. Whatever the motive, it's an attractive time to buy premium on short-term Fitbit options. The stock's Schaeffer's Volatility Index (SVI) of 46% ranks in the 17th annual percentile, pointing to relatively muted volatility expectations at the moment.