Post-Earnings Bull Gap Sparks iRobot Corporation (IRBT) Options Frenzy

Fresh off a record high, iRobot Corporation (IRBT) call options are trading at 17 times the expected intraday clip

by Alex Eppstein

Published on Oct 26, 2016 at 12:38 PM
Updated on Jun 24, 2020 at 10:16 AM

Roomba maker iRobot Corporation (NASDAQ:IRBT) is roaring on the charts this afternoon amid heavy volume. At last check, the shares have shot 13.2% higher to $49.72, and earlier touched a record peak of $50.84, following a blowout earnings report. What's more, intraday stock volume ranks in the 100th percentile of its annual range -- as does IRBT's options volume.

Drilling deeper into the options data, calls are running at 17 times the expected intraday rate -- though, from an absolute perspective, volume is still low. By the numbers, 1,009 IRBT calls are on the tape, compared to a typical volume of 59 contracts at this point in the session. For comparison's sake, not even 200 put options have changed hands so far.

Today's propensity toward calls over puts is anything but normal, based on numbers from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Specifically, iRobot has racked up a 10-day put/call volume ratio of 1.28, ranking in the pessimistically skewed 84th percentile of its 52-week range. If these put buyers are actually bears -- and not just shareholders hedging against an unforeseen pullback -- they must be feeling the heat today.

The stock's post-earnings bull gap is likely also burning short sellers, of which there are many. Nearly 16% of iRobot Corporation's (NASDAQ:IRBT) float is sold short. More incredible yet, at IRBT's average daily trading levels, it would take over four weeks for short sellers to buy back their bearish positions -- hinting at ample sideline cash to potentially fuel further gains.

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