Is Icahn Chatter Luring GoPro, Inc. (GPRO) Option Bulls?

GoPro Inc (GPRO) traders are buying April calls amid Icahn chatter

by Griffin Kruse

Published on Apr 7, 2015 at 3:42 PM
Updated on Apr 20, 2015 at 5:32 PM

GoPro Inc (NASDAQ:GPRO) is up 0.1% to $43.60, putting the shares' year-to-date deficit at 31%. However, GPRO calls remain hot amid rumors that activist investor Carl Icahn is taking a stake in the mobile camera operator -- buzz that sent the stock on a roller coaster ride in early trading.

Calls are exchanging hands at over double the rate of puts today. The day's most active contract by far is the April 43 call, where potential buy-to-open activity has been observed. By purchasing this call at a volume-weighted average price (VWAP) of $1.44, the buyers will profit if GPRO topples $44.44 (strike plus VWAP) by Friday, April 17, when the contract expires.

However, today's appetite for long calls is par for the course. Over the past two weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), 1.99 GPRO calls have been bought to open for every put. A capitulation of optimism among options traders could pressure the shares even lower. However, over one-third of GPRO's available float is sold short, showing that some of this call buying -- particularly at out-of-the-money strikes -- could be at the hands of short sellers looking for a hedge.

Looking elsewhere, the brokerage bunch has taken a mostly bullish stance on GoPro Inc (NASDAQ:GPRO). Fifty-four percent of covering analysts rate the stock a "buy" or better, with only 8% doling out "strong sell" ratings. Additionally, GPRO's consensus 12-month price target of $63.23 represents a lofty 45% premium to current trading levels, leaving the door wide open for a round of price-target reductions and/or downgrades to create headwinds.

Daily Chart of GPRO Since June 2014

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