Roku – Trade Idea

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 VolatilityRV Realized VolatilityIVP Implied Volatility Percentile
699042

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:

SideQtyExpStrikeType
Buy120 Dec150Put
Sell120 Dec140Put
Buy120 Dec135Put
Sell120 Dec115Put

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

This website is a general communication being provided for informational purposes only. It is educational in nature and not designed to be a recommendation for any specific investment product, strategy, plan feature or other purposes. By receiving this communication you agree with the intended purpose described above. Any examples used in this material are generic, hypothetical and for illustration purposes only. None of EQT Media, its affiliates or representatives is suggesting that the recipient or any other person take a specific course of action or any action at all. Communications such as this are not impartial and are provided in connection with the advertising and marketing of products and services. Prior to making any investment or financial decisions, an investor should seek individualized advice from a personal financial, legal, tax and other professional advisors that take into account all of the particular facts and circumstances of an investor’s own situation. Opinions and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. We believe the information provided here is reliable but should not be assumed to be accurate or complete. The views and strategies described may not be suitable for all investors. This communication may not be redistributed or retransmitted, in whole or in part, or in any form or manner, without the express written consent of EQT Option. Any unauthorized use or disclosure is prohibited. Receipt and review of this information constitutes your agreement not to redistribute or retransmit the contents and information contained in this communication without first obtaining express permission from an authorized officer of EQT Option.