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Analyzing the Bold Upside Bet On Nokia Corporation (ADR) (NOK)

A trader bought an enormous lot of long-term Nokia Corporation (ADR) calls yesterday

by 7/17/2014 10:11 AM
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Nokia Corporation (ADR) (NYSE:NOK) calls ran at twice the normal daily pace yesterday. By the numbers, 25,000 calls changed hands, versus just 519 puts. Digging deeper, most of the activity transpired at a single strike -- namely, NOK's January 2015 8-strike call, where 20,248 contracts were exchanged. Almost all of the calls traded at the ask price, and open interest skyrocketed overnight, suggesting they were bought to open.

Looking even closer, the vast majority of the calls crossed as a block of 19,245 contracts -- at the ask price of $0.46 each, for a total cash outlay of $885,270 (premium paid * number of contracts * 100 shares per contract). This represents the speculator's maximum potential risk, should the shares be resting below $8 at January 2015 options expiration. Conversely, gains are theoretically unlimited north of the at-expiration breakeven point of $8.46 (strike plus premium paid) -- a level not explored since May 2011.

On the charts, NOK has been churning between $7 and $8 since last October. Nevertheless, the shares have still managed an impressive year-over-year advance of nearly 86%, and at last check, were sitting at $7.51.

Looking ahead, Nokia Corporation (ADR) (NYSE:NOK) is scheduled to step into the earnings confessional one week from today. The company's history here hasn't been pretty. Despite matching or exceeding analysts' per-share profit expectations in each of the past eight quarters, the stock averages a loss of 3.8% in the subsequent week. This time around, the Street is calling for earnings of 6 cents per share.


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