Roku Stock Lower Despite Analyst Upgrade

ROKU has underperformed on the charts in March

Managing Editor
Mar 27, 2018 at 10:05 AM
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Roku Inc (NASDAQ:ROKU) stock is lower today, down 1.5% at $34.06, despite receiving some bullish analyst attention this morning. Citigroup upgraded the streaming device stock to "neutral" from "sell," while raising its price target to $36 from $33. The upgrade comes ahead of the stock's initial public offering (IPO) lock-up expiration today. 

It's been a rough stretch lately for ROKU, having posted a daily gain only four times in March, and shedding 34% in 2018. Since a bear gap after earnings in February, the shares have been guided lower by their descending 10-day moving average. 

Short sellers continue to pile on the struggling security. Short interest increased by 56% during the most recent reporting periods, to 9.95 million shares, a record high. This represents a whopping 63.5% of ROKU's total available float. 

Options traders, however, continue to favor calls. This is evidenced by data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) that shows the equity with a 10-day call/put volume ratio of 1.60. However, some of the recent call buying -- particularly at out-of-the-money strikes -- could be attributable to Roku shorts seeking an options hedge.

Echoing that, the deep out-of-the-money April 60 call is home to peak call open interest of more than 5,300 contracts. Data from the major exchanges indicates a healthy portion of the calls were bought to open.

Near-term options traders can pick up Roku contracts for a relative steal, too. The equity's Schaeffer's Volatility Index (SVI) of 65% is in just the 12th percentile of its annual range, suggesting short-term options are pricing in relatively muted volatility expectations for ROKU stock.

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