Options Traders Blast Roku Stock After Guggenheim Upgrade

ROKU sports attractively priced premiums at the moment

Digital Content Manager
Sep 23, 2021 at 10:13 AM
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Streaming concern Roku Inc (NASDAQ:ROKU) is up 3.4% at $335.93 this morning, after the security earned an upgrade from Guggenheim to "buy" from "neutral," with a $395 price target. The analyst in coverage said Roku will benefit from rapid growth in the connected television (CTV) ad marketplace, and noted its international expansion, potential for targeted marketing partnerships, and advertising tools. Plus, earlier today the company announced the expansion of its Canadian advertising business with the OneView ad platform.

Analysts were already majorly optimistic towards Roku stock coming into today, making this last bull note all the more impressive. Of the 17 in question, 15 sport a "strong buy" rating. Plus, the equity's 12-month consensus target price of $467.64 is a whopping 39.2% premium to current levels. 

The options pits are also firmly bullish, with a strong appetite for calls. This is per ROKU's Schaeffer's put/call open interest ratio (SOIR), which stands higher than just 13% of readings from the past year. In simpler terms, short-term options traders have rarely been more call-biased.

Drilling down to today's options activity, 70,000 calls have already crossed the tape, which is five times what is typically seen at this point. Most popular is the weekly 9/24 340-strike call, followed by the 350-strike call in the same series, with positions being opened at both.

Now may be an ideal time to weigh in on Roku stock's next move with options, as the equity sports attractively priced premiums at the moment. ROKU's Schaeffer's Volatility Index (SVI) of 46% stands higher than just 3% of readings from the last 12 months. This suggests the options market is pricing in low volatility expectations for the equity right now.

Also worth mentioning is the equity's score on the Schaeffer's Volatility Scorecard (SVS), which is maxed out at 100. This means Roku stock has often realized higher volatility than the options pits have priced in, making it a perfect premium-buying candidate.

The security has experienced its fair share of of volatility this year. Shares have taken a nosedive on the charts since their Aug. 27, all-time high of $490.76, guided lower by the 20-day moving average. Still, the equity seems to have recently found a floor at the $310 level, and looks ready to topple its 20-day during today's session. Year-over-year, ROKU sports a healthy 73.4% lead.


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