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Option Brief: Nokia Corporation (ADR) (NYSE:NOK) is down 0.5% at $7.52, after the phone maker lost a Supreme Court tax appeal in India. Nevertheless, options speculators are wagering on a recovery for the stock, with calls trading at a 49% mark-up to NOK's average intraday volume.
The equity's 30-day at-the-money implied volatility (IV) is 2.2% higher at 47%, pointing to escalating demand for NOK's shorter-term contracts. Unlike Wednesday's session, calls are outnumbering puts by a near 6-to-1 margin today, with roughly 29,000 and 5,500 contracts traded thus far, respectively. Most of the action has transpired at the May 8 call, where more than 20,600 contracts crossed, primarily in simultaneous blocks just after noon ET. More specifically, almost all of the calls traded at the ask price, and IV on the option is 2.9 percentage points higher, hinting at newly bought bullish bets.
The call buyers' goal is for NOK to be sitting atop $8 at options expiration at the close on Friday, May 16. In fact, the volume-weighted average price (VWAP) of the calls is $0.45, meaning the buyers will reap a reward if the shares are north of $8.45 (strike plus VWAP) -- which would mark a near-three-year high -- at expiration. Risk, meanwhile, is limited to the initial premium paid for the calls, should NOK stay south of $8.
The $8 region has been tough to penetrate for Nokia Corporation (ADR) (NYSE:NOK) shares, as this area has stifled the stock's rally attempts in 2014. Still, delta on the May 8 calls stands at 0.42, implying a roughly 42% chance of the contracts landing in the money at expiration.