Calls Pop on Surging Spotify Stock

One bull appears to be betting on much more upside for the streaming stock

Lillian Currens
Mar 24, 2020 at 11:31 AM
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Shares of music streaming specialist Spotify Technology SA (NYSE:SPOT) are up 8.4% at $128.50 mid-morning, as traders react to a note out of Bernstein. The analyst upgraded SPOT to "market perform" from "underperform," and cut its price target to $124 from $134. Bernstein noted that while Spotify's stock value has seen a sizable slide lower, the firm is holding its outlook for the streaming concern steady. 

Most analysts in coverage are optimistic on the security, with nine out of 15 calling it a "buy" or better. Plus, the consensus 12-month target price is a 28.3% premium to current levels. 

Already, calls are running at a quicker clip than usual, with almost 2,000 across the tape so far today -- nearly double the intraday average -- compared to just 219 puts. Most popular are the the weekly 3/27 130- and 140- strike calls. Drilling down, it looks like one trader just bought to open 100 contracts of the May 165 call at a volume weighted average price of $1.01, according to data from Trade-Alert. This means this traders is expecting SPOT to surge past $166.01 (strike plus premium paid) by the time these contracts expire on Friday, May 15. 

This uptick in bullish bets in the options pits is unusual for Spotify. Recently, bears have ruled the roost. This is per SPOT's 10-day put/call volume ratio of 1.21 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits higher than just 2% of all other readings from the past year, suggesting an elevated interest in long puts of late. 

Today's pop puts SPOT on pace for its first close north of its 10-day moving average in two weeks. But while the equity has added nearly 18% since its March 16 annual low of $109.18, it's still down 13.5% year to date. 

SPOT chart march 24


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