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Call Players Pile On as QUALCOMM, Inc. (QCOM) Nears Decade-Plus High

QUALCOMM, Inc.'s July 82.50 calls are being bought to open today

by 5/1/2014 2:08 PM
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QUALCOMM, Inc. (NASDAQ:QCOM) came within about 3% of taking out its decade-plus high of $81.66 (notched on April 21) earlier, following news that the chip maker will spin off its location-awareness technology, Gimbal, into a separate company. More recently, though, the security was seen lingering near $79.38. In the stock's options pits, a number of speculators are betting on the equity to rally past its recent peak over the next few months by scooping up July 82.50 calls.

At last check, 2,230 contracts had traded at this out-of-the-money strike, 95% of which did so on the ask side, hinting at buyer-driven activity. Meanwhile, implied volatility has ticked higher, pointing to the initiation of new positions. Should QCOM be unable to topple the strike price ahead of the close on Friday, July 18, when the options expire, the most the speculators stand to lose is the initial premium paid.

This optimistic outlook only highlights the withstanding trend witnessed in QCOM's options pits, per data from three major exchanges. Over the past 50 sessions, the equity has racked up a call/put volume ratio of 2.82 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). What's more, this ratio ranks in the 92nd percentile of its annual range, meaning traders have bought to open calls over puts with more rapidity just 8% of the time in the past 12 months.

Looking at the charts, it's easy to understand why option traders have taken the glass-half-full approach. Since hitting an annual low of $59.02 last July, QCOM has rallied more than 34%. Helping lift the stock higher has been its rising 60-day moving average, which has served as a springboard for the past nine months. In fact, after QCOM tagged the technical milestone noted above, the equity pulled back to this historical trendline and bounced. As a result, QUALCOMM, Inc. (NASDAQ:QCOM) is on pace to notch a weekly gain of 2%.


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