Bearish Expectations Priced Into GoPro Inc (GPRO) Options

Put volume is at peak levels on GoPro Inc (NASDAQ:GPRO), with premium for the puts elevated relative to calls

Dec 1, 2016 at 11:18 AM
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Put players have been blasting GoPro Inc (NASDAQ:GPRO) in recent weeks. Over the past 10 sessions at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), options traders have bought to open 34,073 put options on the tech stock, compared to 17,273 call options. What's more, the resultant put/call volume ratio of 1.97 ranks above all other comparable readings taken in the past 12 months, meaning long puts have been initiated relative to calls on GPRO stock at an annual high clip.

Along similar lines, GPRO's Schaeffer's put/call open interest ratio (SOIR) of 1.25 ranks just 2 percentage points from a 52-week peak, suggesting near-term traders have rarely been as put-heavy as they are now. While this put-skew is likely due to the hefty accumulation of outstanding contracts in the January 2017 series of options -- nine of GPRO's 10 biggest open interest positions reside in this standard monthly series -- the trend is seen in December options, as well. In fact, the security's front-month gamma-weighted SOIR is docked at a top-heavy 2.01.

And not to belabor the point, but put open interest of 261,819 contracts across all GPRO options series ranks in the 94th percentile of its annual range, while put volume topped out at a 12-month peak of 152,887 contracts traded in a single session as recently as Nov. 4. More recently, GPRO's one-day put/call volume ratio hit 5.71 on Nov. 21 -- its highest perch in the previous 52-week period.

Amid this increased demand, GPRO put options have become more expensive than call options, per its 30-day implied volatility skew, which topped out at an annual high of 87.9% on Nov. 2, and was last seen at 19% -- in the elevated 88th percentile of its intraday range. For example, the at-the-money 10 strike is most popular across both weekly and standard series through the end of the year, with more than 18,000 contracts outstanding. At last check, the ask price on the December 10 put was $0.79, while the ask price on the December 10 call was $0.46.

GPRO open interest configuration

Looking at the charts, it should be of little surprise why the options market is expecting the worst for GPRO, considering the shares have done little to inspire confidence in traders. In fact, although seeing some upside yesterday after GoPro Inc (NASDAQ:GPRO) unveiled a round of cost-cutting measures, the stock is currently down 1.2% at $9.85, and 45.3% lower year-to-date. Meanwhile, the shares could see some action in tomorrow's trading, with chip supplier Ambarella Inc (NASDAQ:AMBA) set to report earnings after tonight's close.

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