Options traders are targeting ROKU stock as it moves sharply higher
Streaming stock Roku Inc (NASDAQ:ROKU) was last seen up 10% at $81.88, after the company announced a deal with Amazon.com (AMZN) to create a connected TV footprint. Combined, the two companies cover an estimated 80 million connected-TV households, and marketers will now be able to use Amazon's ad-buying system to reach that merged audience.
On the charts, today's pop has ROKU reclaiming its year-to-date breakeven level and on track for its highest close since March 6. The shares have also now formed a bullish falling wedge pattern from a descending trendline off their Feb. 14 annual high of $104.96. Year-over-year, the equity is up 48.7%.
Options traders are chiming in after the reports. So far, 24,000 calls and 4,736 puts have been exchanged, which is nine times the overall options volume typically seen at this point in a session. The June 85 call is the most active, with new positions being sold to open there.
Though the shares have been steadily climbing since early-April, shorts have been piling on. Short interest is up 24.9% in the last month, and now accounts for 7.6% of the stock's available float. An unwinding of some of this pessimism could help fuel gains.
Premiums are affordable amid low volatility expectations, per the stock's Schaeffer's Volatility Index (SVI) of 49% that stands in the relatively low 9th percentile of annual readings. A premium-selling strategy could be the right move, given ROKU sports a Schaeffer's Volatility Scorecard (SVS) of 15 out of 100. In other words, the stock has consistently realized lower volatility than its options have priced in.