Roblox Up Over 7% On Heavy Options Activity

Roblox Corporation RBLX is up more than 7% today on heavy options volume to end the week. The stock recently got a boost from Needham initiating coverage, giving it a Buy rating and a $136 price target.

What Happened: Combine the buy rating and a price target 36% higher and option traders have stepped in large today, trading more than 147,000 options with approximately 98,000 calls and 48,000 puts (image below).

Prior to the cash open today, Roblox had approximately 315,000 calls and 215,000 puts, of which 43% were expiring on Dec. 17 (~227,000 options). But only half of the flows today are short-dated with the next largest expiry on Dec. 23 next week.

SEE ALSO: Why Roblox Shares Are Rising

Why It Matters: The large number of flows expiring today would increase volatility into next week. But the presence of a healthy amount of calls being bought for the Dec. 23 expiry and the Jan. 21 expiry (next year) suggest option traders are taking a short to medium-term bullish outlook over the next few weeks.

What's Next: The forward-looking open interest is more bullish than bearish with dealer gamma hedging requirements somewhat flat between $82 and $110, so the hedging impacts from dealers should be mild over this range of strikes. However, gamma increases sharply from $82 and lower, suggesting dealers may actually unwind some of their short hedges as the stock goes to $82 and lower and may provide support on pullbacks.

Meanwhile, the next resistance doesn't come in until about $109, so there is room for the stock to run short term. If the stock pulls back, bulls may want to wait till the mid-$80s before adding longs while bears will want to wait until around $110 before potentially considering short plays.

Image: Courtesy Roblox