Needham on Monday said Roku is "materially cheaper" than Netflix
Shares of Roku Inc (NASDAQ:ROKU) are up 8.7% to trade at $50.55 -- earlier hitting a record high of $50.90 -- after Adobe Analytics said the company's streaming devices were among the top sellers on Cyber Monday. This follows the stock's nearly 18% pop on Monday, thanks to a $22 price-target hike to $50 at Needham, which said ROKU stock is "materially cheaper" than rival Netflix (NFLX). As such, ROKU options are flying off the shelves, with many traders betting on bigger gains by week's end.
Taking a quick step back, 30,095 calls and 15,499 puts have traded on ROKU so far -- four times what's typically seen at this point in the day, and total options volume running in the 100th annual percentile. Most active are the weekly 12/1 50- and 55-strike calls, where it looks like new positions are possibly being purchased. If this is the case, the goal is for the equity to break out above the respective strikes by expiration at this Friday's close.
Today's call-skewed session is nothing new for ROKU stock, though. Over the past 10 sessions at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculative players have bought to open 37,455 calls, compared to 32,560 puts.
In fact, total call open interest of 65,038 contracts is the most since ROKU options began trading in early October. And while put open interest of 65,301 contracts does have a slight edge over calls, this is down significantly from the Nov. 17 all-time peak of 89,138 puts outstanding.
The weekly 12/1 52-strike call is home to ROKU's top open interest position of 3,943 contracts. Data from Trade-Alert indicates most of this activity occurred yesterday, and was the result of options traders buying to open the calls.
Outside of the options pits, sentiment toward the streaming name is decidedly more skeptical. Short interest surged 15.8% in the most recent reporting period to 4.78 million shares -- or 30.51% of Roku's available float.
Therefore, it's possible some of the recent call buying, particularly at out-of-the-money (OOTM) strikes, is a result of short sellers hedging against any additional upside risk. Regardless, the most these options traders stand to lose should the calls expire OOTM is the initial premium paid.