Pre-Earnings Optimism Builds On Gogo Inc (GOGO)

Gogo Inc (GOGO) is slated to report fourth-quarter earnings tomorrow morning

by Karee Venema

Published on Feb 25, 2015 at 10:57 AM
Updated on Apr 20, 2015 at 5:32 PM

Gogo Inc (NASDAQ:GOGO) call players have been flooding the equity's options pits in recent weeks, as the company prepares to tell all in the earnings confessional bright and early tomorrow morning. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), for example, the stock's 10-day call/put volume ratio of 20.19 ranks in the 87th annual percentile. In other words, calls have been bought to open over puts at a faster-than-usual clip.

Echoing this call-skewed bias is GOGO's Schaeffer's put/call open interest ratio (SOIR) of 0.47. Not only does this show that call open interest more than doubles put open interest among options slated to expire in three months or less, but it rests lower than 78% of similar readings taken in the past year. Simply stated, speculative traders are more call-heavy than usual toward GOGO.

It's a similar set-up in today's trading, where calls are being exchanged at seven times what's typically seen at this point in the day, and are outpacing puts by a 4-to-1 ratio. Receiving notable attention is GOGO's August 22 call, and it appears new positions are being purchased. By buying the calls to open, speculators expect the security to topple the $22 mark -- an area not charted since last April -- by August options expiration.

On the charts, GOGO is in rally mode today -- up 7.1% at $17.75 -- amid news that Delta Air Lines, Inc. (NYSE:DAL) has chosen the company to provide in-flight Wi-Fi on more than 250 aircraft. If past is prologue, the stock could be poised for additional gains once it steps up to the earnings plate tomorrow. Over the past six quarters, Gogo Inc (NASDAQ:GOGO) has averaged a single-session post-earnings gain of 5.4%, including a 10.6% surge last November. With nearly 40% of GOGO's float sold short, though, it's possible some of the recent call buying may be a result of shorts hedging against another post-earnings pop.

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