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Unlike the withstanding trend, calls are the options of choice on Alcatel Lucent SA (ADR) (NYSE:ALU) this afternoon, trading at almost five times the average intraday pace. By the numbers, around 12,000 calls have changed hands, compared to fewer than 120 puts. Nearly all of the day's call volume has centered on ALU's June 4.33 strike, and it appears traders are betting on a big move higher over the next eight-plus weeks -- a time frame that includes the company's quarterly earnings report.
More than 10,300 contracts have changed hands at this out-of-the-money strike, including a large sweep of 9,990. Nearly all of these calls have gone off at the ask price, hinting at buyer-driven activity. Plus, implied volatility is up 3.9 percentage points, pointing to the initiation of new positions. The volume-weighted average price (VWAP) for the calls is $0.19, making breakeven at the close on Friday, June 20 -- when the options expire -- $4.52 (strike plus VWAP). Should ALU fail to rally the 12% needed from its current perch at $3.87 to topple the strike price, the most the speculators stand to lose is the initial premium paid.
However, as noted, the lifetime of these calls encompasses ALU's quarterly earnings report, slated for release the morning of Friday, May 9. Despite falling short of analysts' bottom-line projections in two of the previous three quarters, ALU has gone on to average a one-day post-earnings gain of 8.7%, which swells to 12.9% when going out one week past the results. For the first quarter, analysts are calling for a per-share loss of 7 cents -- a 12-cent improvement over Alcatel Lucent SA's (ADR) (NYSE:ALU) year-ago results.