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Selling to open puts has been a popular strategy in Nokia Corporation's (ADR) (NYSE:NOK) options pits of late. During the past 10 sessions, in fact, speculators on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have sold to open 2.44 puts for each one they've purchased.
This trend was witnessed on Tuesday, when the majority of the 6,327 puts traded -- representing two times the expected daily amount -- went off at the November 8 strike. Specifically, 5,695 contracts crossed the tape here, 79% at the bid price, suggesting they were sold. Open interest soared overnight, making it safe to assume a fresh batch of short positions was initiated.
By selling to open the puts, speculators expect NOK to maintain its perch atop the $8 mark -- which currently coincides with the stock's 80-day moving average -- through the close on Friday, Nov. 21, when back-month options expire. Drilling down, now appears to be an opportune time to sell premium at this strike, considering its implied volatility is inflated relative to the security's 40-day historical volatility (32% vs. 18.8%). Simply stated, premium is more expensive than usual, from a volatility perspective.
Technically speaking, NOK has added a modest 2.5% this year to trade at $8.31. Meanwhile, the lifetime of the aforementioned puts encompasses the company's third-quarter earnings report -- slated for release on Thursday, Oct. 23. Despite matching or exceeding analysts' bottom-line estimates in each of the past eight quarters, Nokia Corporation (ADR) (NYSE:NOK) has averaged a single-session post-earnings loss of 2.2%, which widens to 3.9% going out one week.