Roku Options Traders May Be Betting Big On 'Roku Recommends' Product

Roku Inc. ROKU is in the preparation phase of a new promotional product called Roku Recommends, according to a report published Tuesday by DigiDay, an online trade magazine. 

The new product is a video advertisement that will be sponsored by a brand and play on Roku’s platform when a customer clicks a pop-up on their TV screen, according to the report, which cited three unnamed advertising executives. 

Brands are reportedly being asked to pay in the low to mid-six figure range for the advertisement. The product is set to roll out in the second or third quarter of this year, according to DigiDay. 

Option Traders may be betting the news report will become reality in the first half of the second quarter, as Tuesday’s bullish bets all have a May 21 expiry.

Evercore ISI has also initiated coverage of the streaming stock Tuesday with an Outperform rating and $400 price target. 

The Roku Trades: At 10:26 a.m., a trader executed a call sweep of 406 Roku options with a $390 strike price expiring on May 21. The trade represented a $666,700 bullish bet for which the trader paid $16.42 per option contract.

At 10:26 a.m., a trader executed a call sweep of 373 Roku options with a $390 strike price expiring on May 21. The trade represented a $631,600 bullish bet for which the trader paid $16.93 per option contract.

At 10:26 a.m., a trader executed a call sweep of 406 Roku options with a $390 strike price expiring on May 21. The trade represented a $623,000 bullish bet for which the trader paid $17.95 per option contract.

At 10:27 a.m., a trader executed a call sweep of 335 Roku options with a $390 strike price expiring on May 21. The trade represented a $616,800 bullish bet for which the trader paid $18.41 per option contract.

At 10:28 a.m., a trader executed a call sweep of 304 Roku options with a $390 strike price expiring on May 21. The trade represented a $549,000 bullish bet for which the trader paid $19.26 per option contract.

Together traders are betting over $3.08 million the share price of Roku is going higher.

Why It’s Important: When a sweep order occurs, it indicates the trader wanted to get into a position quickly and is anticipating an imminent large move in stock price.

A sweeper pays market price for the call option instead of placing a bid, which sweeps the order book of multiple exchanges to fill the order immediately.

These types of call option orders are usually made by institutions, and retail investors can find watching for sweepers useful because it indicates “smart money” has entered into a position.

ROKU Price Action: Shares of Roku gained 9.47% Tuesday, closing at $359.37. 

Photo courtesy of Roku.