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Option Brief: Nokia Corporation (ADR) (NYSE:NOK) has had a long and tedious struggle in the $8 area going back roughly three years. Although the stock experienced a number of daily closes north of this mark earlier this year, this level has more recently proven its might as a technical ceiling. However, this didn't scare away a number of call players in yesterday's session, who bet on the telecom concern to take out this layer of historical resistance over the next five-plus months.
By the numbers, calls were the obvious choice on Wednesday, trading at two times the daily average, and outpacing puts by a more than 3-to-1 margin. Accounting for roughly 29% of the day's call volume was the activity at the October 8 strike, where 16,790 contracts crossed the tape -- mostly at the ask price. Open interest rose the most of any strike overnight, making it safe to assume that new bullish positions were purchased.
As touched upon, the $8 area has played a key role in NOK's technical progress in recent years. Should the stock fail to topple the strike price by October options expiration, though, the most the speculators have to lose is the initial premium paid. According to Trade-Alert, the volume-weighted average price (VWAP) for the calls was $0.46. Meanwhile, based on this average entry price, breakeven at the close on Friday, October 17 -- when the options expire -- is $8.46 (strike plus VWAP), a level NOK has not charted since May 2011.
In yesterday's session, the equity edged closer to this overhead mark, thanks to a round of post-earnings price-target hikes. However, today, Nokia Corporation (ADR) (NYSE:NOK) is down 0.4% at $7.47, after this morning's downbeat brokerage note.