GoPro, Inc. (GPRO) and the $1.9 Million Gamble

GoPro Inc (NASDAQ:GPRO) is plummeting once again in the wake of last week's poorly received earnings report and management shake-up. At last check, the shares were 5.4% lower at $44.57, and sitting on the short-sale restricted list. Meanwhile, options volume is heating up, with the contracts crossing at more than double the usual intraday rate.

Digging deeper, a number of long straddles may have been initiated at GPRO's February 70 strike. For example, among the session's largest transactions was a pair of matching 750-contract blocks, bought to open at the February 70 put and call, for a premium of $25.40 per pair of contracts -- or roughly $1.9 million total (number of contracts * premium paid * 100 shares per contract). This represents the buyer's maximum potential risk on the trade, should the underlying land precisely at $70 at the close on Friday, Feb. 20.

Unlike straight long puts or long calls, though, long straddles have two breakeven points. Specifically, the trader is hoping for GPRO to settle below $44.60 (put strike less premium paid), or rebound above $95.40 (call strike plus premium paid), at expiration.

Understandably, the strategist is giving the former scenario a much higher probability, seeing as the long put is already deep in the money -- and, in fact, the stock's current price is below the lower breakeven mark. Delta on the GoPro Inc (NASDAQ:GPRO) February 70 put is negative 0.93, whereas delta on the February 70 call is a nearly negligible 0.01.