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Bullish Trader Goes All In On Nokia Corporation (ADR) (NOK)

A closer look at a $600,000 trade on Nokia Corporation (ADR)

by 5/30/2014 1:58 PM
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Option Brief: Traders are flocking to Nokia Corporation's (ADR) (NYSE:NOK) options pits this afternoon. Volume is running at a much faster-than-usual pace, especially on the call side, where 94,000 contracts have changed hands (compared to an intraday average of 12,000). What's more, the tech issue's 30-day at-the-money implied volatility (IV) is 16.4% higher at 36.4% -- rebounding from a 52-week low -- indicating elevated demand for short-term options.

At the head of the class is NOK's August 9 call, where more than 45,000 contracts are on the tape. For comparison, fewer than 10,000 contracts have traded at the second most active strike. In any case, 92% of the contracts at the August-dated option have been exchanged on the ask side, suggesting they were bought. Plus, IV has popped and volume outstrips open interest, together implying freshly minted bullish bets.

Digging even deeper, the majority of the contracts traded as a block of 35,730 for $0.17 each. For this speculator to profit, NOK must muscle north of $9.17 (strike plus premium paid) by the close on Friday, Aug. 15, when the options expire. Additional profits will accrue north of that point. However, if the shares remain below the strike through options expiration (less than three months from now), the trader will risk forfeiting the initial premium paid, or roughly $607,000 ($0.17 premium * 35,730 contracts * 100 shares per contract).

On the charts, Nokia Corporation (ADR) (NYSE:NOK) is 2.2% higher at $8.09, bringing its year-over-year gain north of 130%. However, the stock hasn't traded above $9 since May 2011.

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