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Bears See Impending Declines for Nokia Corporation (ADR) (NOK)

Put players ignore NOK's technical prowess

by 12/18/2013 10:39 AM
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Bearish traders flocked toward Nokia Corporation (ADR) (NYSE:NOK) on Tuesday, as approximately 16,000 puts changed hands throughout the session -- more than double the security's average daily volume. Digging deeper into the data, it looks as though one group of speculators is predicting a tumble for the telecom concern by early next year.

More specifically, 8,163 puts crossed at the January 2014 7 strike yesterday -- nearly two-thirds of them at the ask price, suggesting they were bought. Meanwhile, open interest increased by 5,280 contracts overnight, signaling the addition of new long positions. By purchasing these out-of-the-money contracts to open, the traders are hoping NOK will descend below the $7 mark by the close on Jan. 17.

This pessimism toward the stock is evident outside of the options pits, as well, despite its year-to-date gain of more than 94%. Only four covering analysts have doled out "buy" or better ratings, compared to 17 lukewarm "hold" suggestions. Even more telling, the equity's average 12-month price target of $7.32 denotes a discount to NOK's present perch at $7.68. In other words, a round of upgrades and/or price-target hikes may be on the horizon, which could add more fuel to the security's tank.

Also of note, Nokia Corporation (ADR) (NYSE:NOK) shares are up more than 4% this morning, after China Telecom said it has chosen Nokia Solutions and Networks (NSN) to roll out its LTE 4G network. The partnership will enable the former to utilize the latter's intelligent network management system, NetAct. This news -- and the stock's subsequent bounce higher -- is not a welcome development for those traders who placed bearish bets in Tuesday's session.


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