GoPro Inc (GPRO) Options Traders Bet On Bigger Post-Karma Losses

GoPro Inc (NASDAQ:GPRO) is down sharply, after Monday's unveiling of the Karma drone

by Karee Venema

Published on Sep 20, 2016 at 3:06 PM
Updated on Sep 20, 2016 at 4:24 PM

Options volume is soaring on GoPro Inc (NASDAQ:GPRO), as the tech stock tumbles in the wake of Monday's big product reveal. Specifically, after several days of upside in the lead-up to yesterday's highly anticipated unveiling of its Karma drone and new Hero 5 cameras, GPRO stock is off 6.9% at $14.26 -- and options traders appear to be bracing for even more near-term downside.

By the numbers, around 40,000 call options have changed hands so far on GPRO, compared to roughly 28,900 put options. The stock's October 15 call is most active, where it looks like some options traders are selling to close their positions. Elsewhere, GPRO's weekly 9/30 15-strike put has garnered notable attention, and it appears as if some of the activity is of the buy-to-open kind. If this is the case, the goal is for the security to extend today's decline through next Friday's close, when the weekly options expire.

Widening the sentiment scope reveals GPRO options traders have shown a preference for calls over puts. In fact, among GPRO's 10 top open interest positions, six are calls. In the front-month series, specifically, peak open interest of 12,979 contracts is found at the stock's October 20 call. According to the major options exchanges, a healthy portion of this is a result of traders buying to open positions, meaning they're expecting the stock to break out above the round $20 mark by expiration at the close on Friday, Oct. 21.

However, considering GoPro Inc (NASDAQ:GPRO) hasn't seen the north side of $20 since the start of the year, it's likely that a portion of the activity at this out-of-the-money strike is a result of short sellers hedging their bearish bets against any upside risk. Short interest accounts for a brow-raising 36% of GPRO's available float, or 5.4 times its average daily trading volume.

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