GoPro Inc (GPRO) Breakout Catches the Attention of Call Players

GoPro Inc (GPRO) is getting a lift as traders eye the latest product reveals at CES

Jan 5, 2017 at 2:25 PM
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While GoPro Inc (NASDAQ:GPRO) is busy at the Consumer Electronics Show (CES) in Las Vegas this week -- highlighting new products and apps, as well as the soon-to-be-relaunched Karma drone -- the stock is getting a lift, trading 4% higher at $9.38. At the same time, GPRO's options pits are seeing an unusual rush of action on the call side, though it's not clear whether these speculators are truly bulls.

Diving right in, GPRO call options are currently changing hands at almost three times the expected rate for this point in the session, and nearly doubling the rate of put options. Leading the action by a mile is the weekly 1/13 9.50-strike call, where a sweep of 2,500 contracts was bought to open for $0.25 apiece, according to Trade-Alert. The buyer will profit if GPRO shares rally beyond the $9.75 breakeven mark (strike plus premium paid). Notably, that's a price point the stock hasn't seen on a daily closing basis in a month.

As such, it seems possible that this call buyer -- and others targeting out-of-the-money strikes -- are simply short sellers looking to hedge their bearish bets against additional short-term upside. Nearly one-third of GPRO's stock remains tied up in short interest. In fact, it would take roughly nine sessions for short sellers to buy back all their pessimistic positions, based on the equity's average daily volume.

Meanwhile, unlike today, the prevailing trend among options traders is strongly skewed toward puts. Over the past 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), put options on GPRO have been purchased at nearly twice the rate of calls. Plus, the security's resulting put/call volume ratio of 1.84 sits just 6 percentage points from an annual peak.

Echoing this is GPRO's Schaeffer's put/call open interest ratio (SOIR) of 1.08 -- higher than 78% of the past year's readings. What's more, the stock's front-month gamma-weighted SOIR of 2.17 indicates put open interest more than doubles call open interest among near-the-money options in the January series. It's not a bad time to pick up premium on GPRO options, either. With a Schaeffer's Volatility Index (SVI) of 60% -- in the low 10th percentile of its annual range -- the equity's short-term options are currently well-priced, from a volatility standpoint.

Taking a step back, pessimism toward GPRO is not limited to options traders or short sellers. The brokerage bunch has taken a particularly dim view of the stock, with roughly 88% of analysts maintaining a "hold" or worse opinion.

Of course, all of this skepticism seems warranted, considering GoPro Inc's (NASDAQ:GPRO) technical performance over the past year. The shares have fallen nearly 50% over the last 12 months, and hit a record low of $8.54 in mid-December. On the positive side, GPRO closed above its 20-day moving average on Wednesday for the first time since October, and is poised to finish above its 30-day trendline today. However, the stock still must contend with the $9.50-$9.60 region, which has served as a ceiling since early last month.

GPRO Daily Chart January 5

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