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Nokia Corporation (ADR) (NYSE:NOK) is trending down about 1.4% this afternoon, despite unveiling a new low-priced camera phone today. Bearish speculators seem to be less than impressed by the company's latest product debut, as approximately 18,000 puts have crossed the tape thus far. Digging deeper into the data, it appears that a large number of these traders are betting on a longer-term decline for the mobile phone maker, mimicking Friday's put-skewed action.
Most active this time around has been the January 2015 3-strike put, which has seen nearly 12,000 contracts change hands at a volume-weighted average price (VWAP) of $0.12. Meanwhile, a large portion of the puts traded at the ask price, and implied volatility on the option has ticked almost 1 percentage point higher, hinting at the initiation of new bearish bets.
If these LEAPS were, in fact, bought to open, speculators are counting on NOK to retreat below breakeven at $2.88 (strike price less the VWAP) by January 2015 expiration. This denotes a drop of about 54% from the security's present perch at $6.32, as well as territory not breached since last November.
At last check, the delta for this put stood at negative 0.058, implying it has a less than 6% chance of arriving in the money by the time it expires. Still, even if the shares stay north of the $3 mark throughout the option's shelf-life, the most today's bears risk forfeiting is the initial cash outlay.
Technically speaking, Nokia Corporation (ADR) (NYSE:NOK) has advanced more than 59% so far this year, and has more than doubled in value during the last 12 months. In fact, the shares gapped 31.3% higher on Sept. 3 alone, after Microsoft Corporation (NASDAQ:MSFT) agreed to acquire NOK's handset business for roughly $7 billion. The stock went on to touch a new annual high of $6.47 several days later. In light of this, some of today's put activity at the deep out-of-the-money strike could represent shareholders picking up some options-related insurance against a steeper slide.
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