Options Traders Brace for GoPro Inc (GPRO) Earnings

GoPro Inc (GPRO) is sliding on the charts ahead of its earnings report

Nov 3, 2016 at 3:11 PM
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After the closing bell this evening, GoPro Inc (NASDAQ:GPRO) will release its third-quarter earnings report, and traders seem to be bracing for the worst. In fact, the stock is down 6.2% at $12.05 today, slumping in sympathy with Fitbit Inc's (NYSE:FIT) post-earnings plummet. Judging by the action seen in GPRO's options pits today -- and in recent weeks -- more than a few speculators are expecting tonight's results to miss the mark, as well.

In GPRO's options pits, puts are changing hands at four times the usual intraday rate, with the intraday put/call volume ratio of 2.45 just 1 percentage point from a 12-month peak. The weekly 11/4 series is dominating today's action, representing nine of the 10 most active contracts. The 11.50-strike put has seen the most activity overall, followed by the 10-strike put, as traders take action before the options expire at today's close. 

Longer term, options traders have been unusually put-heavy toward GPRO. Though long calls have outnumbered puts on an absolute basis, the stock's 10-day put/call volume ratio on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits in the top quartile of its 12-month range, at 0.76. Moreover, GPRO's front-month gamma-weighted Schaeffer's put/call open interest ratio (SOIR) of 1.73 shows puts far outweighing calls among near-the-money options in the November series.

Pessimism is rampant outside of the options pits, also. Roughly one-third of GPRO's available float is sold short, representing nearly a week's worth of buying power, at the stock's average daily volume. Plus, nine out of 15 analysts currently give GPRO a "hold" or "strong sell" recommendation.

Looking at the stock's technical performance, the bearish sentiment backdrop makes plenty of sense. After all, GPRO has given back over half of its value over the past 12 months. At present, the shares are on pace to close out their fourth consecutive week below their 10-week moving average, which capped a rally attempt in late October.

The stock's earnings history isn’t much in its favor, either. Over the past eight quarters, GPRO has moved lower in the session following its report five times. The stock has made some significant post-earnings moves, too -- the average single-day shift in either direction over the past two years comes in at 9.8%. But this time, speculators are looking for more. The options market is currently pricing in a 22.5% swing for GoPro Inc (NASDAQ:GPRO) on Friday.

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