Red-Hot GoPro Stock Attracts Fresh Batch of Call Buyers – Schaeffers Research (blog)

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Shares of GoPro Inc (NASDAQ:GPRO) have been tearing up the charts since early August — gapping higher last week on the tech name’s strong guidance — with today’s price action just more of the same. At last check, GPRO stock was 8% higher at $11.08, after Citigroup raised its price target to $10.50 from $9.50. As the security takes aim at its highest close on 2017, options traders are piling on, with calls and puts crossing at two times what’s typically seen at this point in the day.

By the numbers, 10,617 calls and 5,904 puts have traded so far, with front-month September strikes accounting for seven of GPRO’s 10 most active options. In the lead is the September 11 call. It looks as if some of the activity could be of the buy-to-open kind, in which case speculators are betting on GoPro stock extending its recent rally through expiration at this Friday’s close.

This penchant for long calls is nothing new for GoPro options traders, though. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock’s 10-day call/put volume ratio of 2.14 ranks in the 68th annual percentile — meaning calls have been bought to open over puts at a faster-than-usual clip.

However, there could be an ulterior motive to this accelerated call buying. Considering how heavily shorted GoPro is — more than one-quarter of its float is dedicated to these bearish bets — short sellers could be initiating options hedges against any additional upside risk. 

Whatever the reason, now is a prime time for traders to buy premium on short-term GoPro options. While its 30-day at-the-money implied volatility of 47.7% ranks in the 13th annual percentile, its Schaeffer’s Volatility Index (SVI) of 46% ranks lower than 93% of all comparable readings taken in the past year. These two volatility indicators suggest relatively muted expectations for GPRO.

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