Citron: Netflix Could Acquire This Streaming Stock

Lower oil prices are lifting Alaska Air shares

Managing Editor
May 25, 2018 at 2:59 PM
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The stock market is trending lower today amid sliding oil prices. Among individual stock movers today, streaming name Roku Inc (NASDAQ:ROKU) and regional airline Alaska Air Group, Inc. (NYSE:ALK) are pointed higher, while supplements stock Herbalife Nutrition Ltd (NYSE:HLF) is crumbling. Here's a closer look at how the shares of ROKU, ALK, and HLF are trading today.

Citron Bull Note Lifting Roku Stock

Roku stock is up 7.9% to trade at $38.86 -- on track to close above its 100-day moving average for the first time since early March -- after notorious short seller Citron Research reversed its position on the streaming stock. The firm noted that "everything has changed" since its bearish tweet about ROKU on Nov. 29, and that "shorts have to know when they overstay their welcome." Further, Citron opined that in the wake of Netflix (NFLX) stock's surge to record highs, "NFLX could look towards advertising to generate new revenue and could easily acquire ROKU."

Options volume has exploded today. Over 44,000 calls have changed hands so far -- four times the average intraday volume and pacing for the 95th percentile of its annual range. For comparison, just 11,000 ROKU puts have traded. Leading the charge is the June 40 call, where it looks like traders are buying to open. 

Regardless of direction, it's an opportune time to target ROKU's short-term options. The equity's Schaeffer's Volatility Index (SVI) of 53% ranks in the 1st percentile of its annual range, indicating premium on short-term contracs is relatively cheap at the moment, from a historical volatility standpoint.

Slipping Oil Prices Boost Airline Stocks

As oil prices slip, airline stocks are climbing higher. At last check, Alaska Air Group stock was up 3.5% to trade at $61.94. The shares are currently testing their 50-day moving average, a trendline that has served as resistance for most of the year. From a long-term perspective, ALK stock has been in a channel of lower highs and lows since mid-2017, and fell to a nearly two-year low of $57.53 on Monday.

Options traders are optimistic, though. The stock's Schaeffer's put/call open interest ratio (SOIR) of 0.52 ranks below all comparable readings from the past year, meaning short-term speculators have rarely been more call-skewed.

What's more, short-term ALK options can be picked up at a relative discount. The equity's SVI of 25% ranks in the 16th annual percentile, meaning low volatility expectations are being priced into short-term contracts -- a boon to potential premium buyers.

Herbalife Sinks After Icahn Cuts Stake

Herbalife stock is down 8% to trade at $49.52, activist investor and long-time HLF defender Carl Icahn said he sold some shares of the stock. While still remaining the biggest shareholder, Icahn noted that it was prudent to reduce his exposure given his outsized position, and said he still thinks Herbalife is "well-positioned for the future." HLF stock is on track to close below its 50-day moving average for the first time in 2018. Earlier this month, the security scored a record high of $56.74, and remains 46% higher year-to-date.

Put buyers have been more way active than call buyers in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), HLF's top-heavy 10-day put/call volume ratio of 13.79 ranks in the 100th annual percentile. This suggests puts have not been purchased over calls at a faster clip this year.

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