Traders are betting on a big move higher in GoPro (GPRO). The July 2021 $5 calls just saw over 2,500 contracts trade, a 24-fold surge in volume over the prior open interest of near 100 contracts.
Expiring in 291 days, the bet is that shares will rally over 10 percent from their current price near $4.25. The call buyer paid about $0.84, or $84 per contract, on average.
Shares of the “selfie stick” company will need to move over 25 percent higher in the next nine months to move in-the-money. While that may sound like a stretch, shares put in a 52-week high back in August around $5.60, so it’s possible that the next rally higher moves the share price over $6.00. And any surprising earings beat could lead to an even bigger move from there.
Action to take: The July 2021 calls are inexpensive bet on a volatile company. If the share price can rebound, these options should pay off handsomely.
That’s the kind of low-risk/moderate reward return that makes sense with out-of-the-money call options. And with plenty of time to play out, it’s a bet worth making now, as the time premium will take some time to decline.
It’s unlikely that shares will, say, double in the timeframe of the option, so traders should look for low-triple-digit returns on the option.