Options Bulls See Silver Lining for Glu Mobile Stock

A historically bullish signal flashing could keep some wind at the equity's back

Deputy Editor
Aug 13, 2020 at 12:36 PM
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Options players are bombarding Glu Mobile Inc. (NASDAQ:GLUU) this afternoon. While the reasons are unclear, GLUU is attempting to recover from a negative earnings reaction and subsequent four-month low earlier this month. The mobile gaming stock is up 2.4% at $7.76 today, testing recent pressure at its 160-day moving average.

So far, 37,000 calls have crossed the tape, which is 11 times the intraday average with volume running in the 99th percentile of its 12-month range. This is compared to just 482 puts traded in the same period. Most popular by far is the August 8 call, where positions are being bought to open. Next in line is the December 11 call, where contracts are also being opened. This suggests these traders expect more upside for GLUU both long-term, and in the near future. 

A look back shows the overwhelmingly bullish nature of Glu Mobile's options pits. In the last 10 weeks, an eyebrow-raising 49.97 calls were picked up for every put at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio stands above all but one other annual reading, suggesting this penchant for long calls is unusual. 

These traders could be in luck. GLUU's post-earnings pullback put it right in line with its 200-day moving average, which has been bullish for the equity in the past. In fact, a study from Schaeffer's Senior Quantitative Analyst Rocky White shows two similar signals flashing in the past three years. GLUU was higher one month after one of these signals and averaged a one-month return of 5.2%. A similar move would put the security at $8.16, right below its pre-gap lows. 

GLUU Chart Aug 13

With earnings in the rear view, a volatility crush has made Glu Mobile options quite cheap, from a historical volatility standpoint. This is per GLUU's Schaeffer's Volatility Index (SVI) of 66%, which sits in the 23rd percentile of its annual range. This suggests options players have been pricing in relatively low volatility expectations at the moment. 

 


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