GoPro Inc (GPRO) Rally Sparks a Run on Call Options

GoPro Inc (NASDAQ:GPRO) is trading at seven-month highs, and GPRO's call options are flying off the shelves, ahead of the Omni RV launch

by Andrea Kramer

Published on Aug 15, 2016 at 2:55 PM
Updated on Jun 24, 2020 at 10:16 AM

The shares of GoPro Inc (NASDAQ:GPRO) have skyrocketed 10.5% to flirt with $15.80 -- a seven-month high. While the specific catalyst is unclear, traders may be waxing optimistic on the company's Omni RV, a 360-degree camera rig, slated to launch Wednesday, Aug. 17, or perhaps they're encouraged by the growing list of Hero 5 spec rumors. Whatever the catalyst, GPRO call options are flying off the shelves like hotcakes.

GPRO calls are trading at four times the average intraday pace, and have more than tripled GPRO put options thus far. In fact, GPRO call volume is on pace to hit the 97th percentile of its annual range.

Along with some spread activity in the September series, it looks like one trader may be rolling her bullish position to a higher strike. Specifically, data from the International Securities Exchange (ISE) suggests the trader is selling to close in-the-money August 13 calls, and using the proceeds to buy to open August 15 calls.

That's not to say today's appetite for GPRO calls is new, though. On the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 50-day call/put volume ratio of 2.08 is higher than 99% of all other readings from the past year. In other words, option buyers have been upping the bullish ante quite a bit during the past 10 weeks.

However, it's worth noting that short interest still accounts for more than one-third of GPRO's available float, and increased 14% during the most recent reporting period. As such, it's possible that some of the recent call buying -- particularly at out-of-the-money strikes -- could be attributable to short sellers seeking an options hedge in the event of an extended rally.

But now is an opportune time to scoop up short-term GPRO options. The stock's Schaeffer's Volatility Index (SVI) of 56% is higher than just 8% of all other readings from the past 12 months, suggesting near-term options are pricing in historically low volatility expectations right now. Plus, the stock's Schaeffer's Volatility Scorecard (SVS) sits at a lofty 85, indicating GPRO has tended to make outsized moves on the charts during the past year, relative to what the options market has priced in.

Whether the recent call buying is "vanilla" in nature or an act of protecting pessimistic positions, one thing is clear: GoPro Inc (NASDAQ:GPRO) has been a monster on the charts of late. Even before today's surge, the stock had outperformed the broader S&P 500 Index (SPX) by more than 50 percentage points during the past three months, and today stands 83% higher than its record low touched May 19 -- not even three months ago.

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