GoPro Inc (NASDAQ:GPRO) is down 5.1% today at $11.65, bringing its year-to-date deficit to 35.3%. However, the stock has been riding atop its 40-day moving average recently, and option traders are betting on a breakout by week’s end.
Specifically, in afternoon trading, GPRO calls outpace puts by a roughly 4-to-1 margin. Much of the attention has gone to the stock’s March 12 call, where more than 5,400 contracts have crossed — more than doubling volume on the second-most-active option. It appears some traders may be buying to open the calls, expecting the shares to top $12 by week’s end, when front-month options expire.
History shows that calls usually have the edge in GPRO’s option pits. The stock’s 10-day call/put volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) comes in at 1.45, meaning call buying has been more popular than put buying during the past two weeks, from an absolute standpoint.
On top of this, GPRO’s Schaeffer’s put/call open interest ratio (SOIR) comes in at 0.62. Not only does this reveal that call open interest outweighs put open interest among options set to expire within three months, but it also lands in the 13th percentile of its annual range. In other words, short-term option traders are more call-skewed than normal.
However, GoPro Inc (NASDAQ:GPRO) is a favorite among short sellers, who control over 28% of the stock’s float. As such, it’s possible some of this focus on calls is the work of shorts hedging their positions. While short interest has been falling on GPRO, declining by 37.5% in the last two reporting periods, it’d still take bears several days to cover their positions, at normal daily volumes. Therefore, there’s still a healthy amount of sideline cash available to fuel a GPRO rally, especially if it bounces off the 40-day trendline.
Source: Schaeffer’s Investment Research