GoPro Inc (GPRO) Call Options Surge Amid Takeover Talk

Takeover chatter has GoPro Inc (GPRO) trading higher after hitting a record low last week

Dec 22, 2016 at 3:01 PM
facebook twitter linkedin

Just one week after hitting a record low, camera maker GoPro Inc (NASDAQ:GPRO) saw an early spike today, amid a fresh round of unconfirmed takeover chatter. After topping out earlier at $9.60, GPRO has pared its gains to hover just above the $9 mark, last seen up 1.5% at $9.03. As a result, a rare batch of call players has popped up in the stock's options pits, where last-minute bets are in high demand.

GPRO calls are changing hands at twice the expected intraday rate, outpacing puts at a more than 3-to-1 clip. Leading the action are the weekly 12/23 9- and 9.50-strike calls, with a combined 7,025 contracts on the tape. In fact, weekly options are popular in general, with the 12/23 and 12/30 series together accounting for seven of the 10 most active strikes.

Today's call-heavy action marks a distinct change of pace for GPRO options traders. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock has seen 1.41 puts purchased for every call over the past 10 weeks. Moreover, the resulting put/call volume ratio represents an annual high.

Near-term traders have been unusually put-skewed toward GPRO as well. The equity's Schaeffer's put/call open interest ratio (SOIR) of 1.12 sits higher than 81% of the past year's readings. What's more, the front-month gamma-weighted SOIR of 2.35 shows put open interest more than doubles call open interest among near-the-money options in the January series.

Meanwhile, short-term options traders are taking advantage of an attractive opportunity. GPRO's near-term options are currently well-priced from a volatility standpoint, per the security's Schaeffer's Volatility Index of 63% -- in the low 14th percentile of its annual range.

Outside of the options arena, skepticism toward GPRO also runs high. Short interest has fallen slightly from its November record high, but still represents nearly one-third of the equity's available float, or 8.5 days' worth of buying power, at GPRO's typical pace of trading. Plus, 13 out of 15 analysts call the stock a "hold" or worse.

Of course, GPRO has done plenty to deserve all this pessimism, from a technical point of view. The stock has shed nearly half its value in 2016 -- including about 46% quarter-to-date. In fact, the shares have underperformed the broader S&P 500 Index (SPX) by nearly 50 percentage points over the past 60 sessions.

Obviously, it's been a different story today, with GoPro Inc (NASDAQ:GPRO) solidly higher. The shares could be bouncing due to the fact that their 14-day Relative Strength Index (RSI) had fallen into oversold territory at Wednesday's close, at 29.

Sign up now for Schaeffer's Market Recap to get all the day's big stock movers, must-know technical levels, and top economic stories straight to your inbox.

Minimize Risk While Maximizing Profits

There is no options strategy like this one, which consistently minimizes risk while maintaining maximum profits. Perfect for traders looking for ways to control risk, reduce losses, and increase the likelihood of success when trading calls and puts. The Schaeffer’s team has over 41 years of options trading success targeting +100% gains on every trade. Rest assured your losses are effectively limited to your initial cost at the time of making your move! Don't waste another second... join us right now before the next trade is released! 


300x250 - Banner 3 - v1