Option Bulls Rush Gogo Inc (GOGO)

Gogo Inc (GOGO) speculators are targeting short-term calls


Published on Feb 20, 2015 at 2:16 PM
Updated on Apr 20, 2015 at 5:09 PM

Call volume for in-flight Internet provider Gogo Inc (NASDAQ:GOGO) is triple the usual intraday pace, with last-minute traders buying to open the February 16 call. The option has seen nearly three times as many contracts cross as the next closest option, as traders bet on the shares to extend gains past $16 before the calls expire at today's close.

More ambitious bulls may be betting on a post-earnings pop by purchasing to open the March 19 call. The contracts will move into the money if GOGO surmounts $19 by the close on Friday, March 20, which encompasses the company's turn in the earnings confessional next Thursday morning. A short-term at-the-money straddle suggests options traders are betting on a 10% move for GOGO, and the stock added 10.6% in the session after its last earnings report.

GOGO broke north of $16 around midday -- in the wake of some love on CNBC -- and was last seen hovering right at that mark, 0.7% higher at $16.05. In the past two months, though, the security has underperformed the S&P 500 Index (SPX). Breakout attempts have been stifled by GOGO's 40-week moving average, currently docked at $16.68.

Weekly Chart of GOGO Since August 2014 with 40-Week Moving Average

Outside of the stock's options pits, traders aren't sold on Gogo Inc (NASDAQ:GOGO). Short sellers are in control of roughly 40% of GOGO's float, representing over three weeks' worth of trading, at normal daily volumes. Against this backdrop, buyers of the March 19 calls could be short sellers looking for an earnings hedge.

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