Spotify Stock Eyes Worst Day in Years After Earnings

Both calls and puts are spiking in popularity today

The shares of Spotify Technology SA (NYSE:SPOT) are in focus this morning, after the streaming service provider reported an adjusted fourth-quarter loss of $1.26 per share, which fell short of expectations. Spotify's first-quarter guidance missed estimates as well, but the company did announce the strategic acquisition of Bill Simmons' The Ringer in an effort to expand its sports vertical.

Out of the gate, Spotify stock is down 5.1% to trade at $147, on track for their worst single-session drop since December 2018. The shares had gained 5.2% in the last seven days, but ran out of steam below the $156 level. And considering SPOT entered today with a 14-day relative strength index (RSI) of 60 -- on the cusp of overbought territory -- the shares may have been due for a dip.

Options traders have been focused on calls. At the the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), 3.02 calls have been bought for every put during the past 10 days. This ratio sits in the elevated 75th percentile of its annual range, suggesting this appetite for bullish bets is unusual.

Shifting gears to today, both puts and calls have roared in popularity. Already over 5,700 options have changed hands, eight times the average intraday amount and volume pacing for the 99th percentile of its annual range. Leading the charge is the weekly 2/7 165-strike call, but there are also new positions being opened at the March 160 call and the weekly 2/7 150-strike put. Options traders targeting the latter clearly see the $150 level as a ceiling for the rest of the week, when the contracts expire.