Roku - Trade Idea | EQT Option

Company Description

Roku, Inc. operates television streaming platform. The Company connects users to streaming content, enables content publishers to build and monetize audiences and provides advertisers with capabilities to engage consumers. Its Roku platform allows users to personalize their content selection with cable television replacement offerings and other streaming services that suit their budget and needs. Ad-supported channels available on the Roku platform include CBS News, Crackle, The CW Television Network and Vice; subscription channels include HBO Now, Hulu and Netflix, as well as traditional pay TV replacement services like DirecTV Now, Sling TV and Sony PlayStation Vue; and transactional channels include Amazon Video, Google Play and Vudu. Its product categories include advertising, Roku TVs and Streaming Players. Source: Reuters.

Charts

Open Interest

Option Pricing

IV Implied Volatility	RV Realized Volatility	IVP Implied Volatility Percentile
69	90	42

Trade Idea

Roku shares are trading lower after the company’s CFO, Steve Louden, sold $14.9 million worth of shares. In addition, the company announced that it may sell up to 1 million shares through Citigroup Global Markets.

Considerations for a bearish thesis:

ROKU is trading at the top end of its 6M trading range. See chart;
Shares are trading at a lofty valuation multiple of 18x EV/LTM Sales;
Tepid forward guidance and slowing growth in profits appear to be discounted by traders and/or investors.

We like tactically fading recent bullish momentum. Find below an example on how you could trade ROKU if you are inclined to add short deltas going into the next expiration cycle:

BUY TO OPEN: DEC EXPIRATION CUSTOM SPREAD FOR $7.75

Side	Qty	Exp	Strike	Type
Buy	1	20 Dec	150	Put
Sell	1	20 Dec	140	Put
Buy	1	20 Dec	135	Put
Sell	1	20 Dec	115	Put

Risk/Reward:

Break-even on expiration: 142.25
Max loss of $7.75 with the share price at or above 150
Max gain of $22.25 with the share price at or below 115

PnL Graph

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