GoPro Inc (GPRO) Call Buyers Hope to Ride the Wave Higher

GoPro Inc (GPRO) call options are trading at a faster-than-usual rate today

Apr 14, 2016 at 1:56 PM
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A day after GoPro Inc (NASDAQ:GPRO) ripped higher on remarks from Raymond James, the wearable camera stock is picking up where it left off. This time around, GPRO is up 1.7% at $14.14, following yesterday afternoon's report that veteran Apple Inc. (NASDAQ:AAPL) designer Daniel Coster has been named the company's vice president of design. Meanwhile, interest in GPRO is growing in the options pits.

Diving right in, GPRO call options are changing hands at triple the expected intraday rate, and outweigh put options 29,000 contracts to 16,000. It looks like traders are buying to open the in-the-money April 13.50 call, which is the stock's most active strike -- banking on the shares extending their momentum through tomorrow's close, when front-month options expire.

The optimism observed among options traders isn't anything new for GPRO. During the past 10 sessions across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open 2.39 calls for every put -- a reading that ranks in the top third of its annual range. Likewise, GPRO's Schaeffer's put/call open interest ratio (SOIR) of 0.73 is lower than 80% of readings from the last 52 weeks, indicating short-term traders are far more call-skewed than usual.

Not every call buyer is necessarily a bull, though. Over the last two reporting periods, short interest on GPRO spiked 14.6%, and now accounts for nearly one-third of the stock's float. Some of these short sellers may have purchased calls -- especially at out-of-the-money strikes -- to serve as a hedge to the upside.

For "vanilla" bulls, call buying has probably paid off in recent weeks. GoPro Inc (NASDAQ:GPRO) has been an absolute beast since hitting an all-time low of $9.01 in early February, surging 57% -- ushered higher by a key trendline. What's more, on a relative-strength basis, the stock has outperformed the broader S&P 500 Index (SPX) by 18.8 percentage points over the previous 60 sessions.

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