Gogo Inc (GOGO) Option Trader Eyes a Bigger Move

Gogo Inc (NASDAQ:GOGO) was targeted for a long straddle in the April series of options

Feb 22, 2016 at 3:17 PM
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Option volume is soaring on Gogo Inc (NASDAQ:GOGO) today, with both calls and puts crossing at four times the average intraday rate. Sparking the action are reports that American Airlines Group Inc (NASDAQ:AAL) has pulled its lawsuit against GOGO. Just last week, news that AAL could be taking its business elsewhere sent GOGO spiraling. Today, however, the shares are up 11% at $11.15.

In the options pits, the stock's April 19 call and put have seen the most action, and it looks as if one speculator may be initiating a long straddle in the back-month series. In other words, she is hoping the stock will make a big move in either direction before the options expire at the close on Friday, April 15.

The stock could see some volatile trading in the very near term, considering GOGO is slated to unveil its fourth-quarter earnings report before Thursday's open. Over the past eight quarters, the security has averaged a single-session post-earnings move of 6.8%.

For the most part, it appears as if a recent batch of option traders have been betting on this post-earnings action to resolve lower. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), GOGO's 10-day put/call volume ratio of 1.05 ranks in the 87th annual percentile.

Regardless, with earnings on the horizon, it's getting pricey to buy premium on Gogo Inc (NASDAQ:GOGO) . Specifically, the stock's Schaeffer's Volatility Index (SVI) of 94% sits just 15 percentage points from a 52-week peak, meaning the stock's short-term options are pricing in lofty volatility expectations.

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