GoPro Inc (GPRO) Dip Draws Option Bears

GoPro Inc (NASDAQ:GPRO) is taking a beating this afternoon, and options traders are betting on more downside this week

Jul 19, 2016 at 3:16 PM
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The shares of action camera maker GoPro Inc (NASDAQ:GPRO) are taking a beating this afternoon, down 6.5% at $11.08. The catalyst behind the drop is unclear, though speculation has been building about the GoPro Hero 5 and next Wednesday's earnings report. However, it seems options traders today are betting on even more downside for GPRO before earnings.

GPRO puts are trading at 1.5 times the average intraday clip, with the weekly 7/22 10.50-strike put most active. It looks like traders are buying to open the puts, which will move into the money if the stock breaches $10.50 by Friday's close, when the contracts expire. That's quite a contrast to recent options action on GoPro supplier Ambarella Inc (NASDAQ:AMBA).

The stock's Schaeffer's put/call open interest ratio (SOIR) of 1.08 is higher than 88% of all other readings from the past year, meaning GPRO's short-term options crowd is already more put-heavy than usual right now. On a broader basis, however, GPRO's total put open interest is relatively depleted, in just the third percentile of its annual range.

Sentiment isn't much rosier elsewhere, as short interest grew 10.6% during the most recent reporting period, and now accounts for 35.2% of GPRO's total float. At the stock's average pace of trading, it would take about a week to buy back these bearish bets.

Analysts are also wary of GPRO. While Oppenheimer last week spoke of a near-term bottom for the shares, 11 out of 17 analysts maintain tepid "hold" or worse ratings.

GPRO suffered a negative earnings reaction after six of its last eight earnings reports, with an average one-day post-earnings move of 10%. In fact, the equity's Schaeffer's Volatility Scorecard (SVS) indicates that GPRO has tended to make outsized moves on the charts during the past year, relative to what the options market has priced in. Meanwhile, the security's Schaeffer's Volatility Index (SVI) of 71% is in just the 30th percentile of its annual range, implying that GPRO's near-term options are still attractively priced right now, from a historical standpoint.

On the charts, it's been a rough road for GPRO over the past year, with the stock surrendering more than 80%. More recently, GoPro Inc (NASDAQ:GPRO) has spent 2016 backing down from resistance in the $12-$14 area, now home to its descending 160-day moving average.

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