Unusual Options Activity: Roku (ROKU)

Shares of TV streaming platform Roku (ROKU) have been trending down since July. One trader sees the possibility for a rebound in the months ahead.

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  • That’s based on the December $325 calls. With 87 days until expiration, over 5,070 contracts traded, a 34-fold increase in volume compared to the prior open interest of 150. The buyer of the calls paid $30.08 to make the trade.

    Shares currently trade around $324, making this an at-the-money trade. Options should rise dollar-for-dollar with shares, less any declining time premium. Shares have traded as high as $490 in the past year, hitting a peak in July.

    Even with the recent large drop in shares, Roku has been growing quickly in the past year. Shares are still up over 70 percent in the past year, and revenue is up 80 percent. Shares are conventionally expensive on a valuation basis, trading at 200 times forward earnings.

    Action to take: This is a high growth stock that’s been out of favor with the market in recent weeks. While a turnaround is likely, investors may want to wait for a clearer sign of a turnaround before buying shares. The stock does not currently pay a dividend.

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  • Traders may like this call trade. The at-the-money trade may not provide the largest percentage returns on a rally, but even a small rally in shares can deliver excellent returns. As with buying shares, look for a clearer sign of a turnaround in the coming weeks before buying calls.

     

    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.