MorningWord 07/07/14: Extreme Trading – $GPRO

by Dan July 7, 2014 9:34 am • Commentary

Volatility is near multi-year lows in almost every publicly traded asset class. While there have been plenty of volatility in single stocks, the price action has usually been dismissed as one off situations and has failed to spread to peers.

One stock that has been moving fairly violently since its June 25th IPO is GoPro (GPRO) (20.5 million shares price at $24). It opened on its first tick up about 18% and then recording 100% gains in its 5th day of trading before dropping 20% from the highs by last week’s close:

GPRO 6 day since IPO chart from Bloomberg
GPRO 6 day since IPO chart from Bloomberg

Options on GPRO will be listed today, and I suspect that the stock’s avg volume of 30 million shares (which is well above the stock’s float) will cause a good bit of interest among traders and those who have been unable to make bearish bets due to the difficulty of borrowing shares.

But as a sort of PSA we would caution trading options in GPRO right out of the gate as implied volatility will be through the roof and bid / ask will be very wide. Liquidity could be very poor.  So if you are considering crossing wide bid ask, at vol levels (based on TWTR’s early options activity last November after its IPO, that could be 50 or 60 vol) you have to anticipate what it will be like to exit said position crossing bid ask once again.

Once the options settle down we’ll circle back for another look.