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Nokia Corporation (ADR) (NOK) Traders Eye a Longer-Term Retreat

Nokia Corporation (ADR) put volume is running at almost two times the intraday average

by 5/27/2014 2:35 PM
Stocks quoted in this article:

Nokia Corporation (ADR) (NYSE:NOK) call players have been active of late, per data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Over the past 10 sessions, specifically, the equity has tallied up a call/put volume ratio of 6.48 on these three major exchanges. What's more, this ratio ranks in the 87th percentile of its annual range, meaning calls have been bought to open over puts with more rapidity just 13% of the time within the past year.

In today's session, the number of calls traded exceeds that of puts, but put volume is running at nearly two times the typical intraday pace. Both call and put players are targeting the $8 mark, as the July 8 call and January 2015 8-strike put have emerged as the two most active options so far. Diving deeper, it appears one speculator in particular bought to close a block of 7,500 July 8 calls -- a theory corroborated by data from the ISE. However, Trade-Alert indicates this action may be tied to stock, meaning a shareholder is pulling the plug on her covered-call strategy.

Meanwhile, there is potentially some buy-to-open activity happening at the January 2015 8-strike put, as nearly all of the 4,545 contracts traded have done so on the ask side. Plus, implied volatility is up 1.3 percentage points, suggesting new positions are being initiated. With NOK lingering near $7.82, these puts are in the money.

However, NOK will ideally plunge all the way to zero by January options expiration, allowing the put buyers to pocket the maximum potential profit of $7.03, or the strike less the volume-weighted average price of $0.97. This also represents the breakeven mark for the play, which -- in order for traders to begin to profit -- is the point NOK must be perched south of at the close on Friday, Jan. 16, when the options expire. Should the equity finish north of the strike price, those that are still holding onto their positions risk losing 100% of the premium paid.

Technically speaking, NOK has spent the majority of 2014 bouncing between $7 and $8, which has translated into an uninspiring 3.6% year-to-date loss. In today's session, Nokia Corporation (ADR) (NYSE:NOK) tagged an intraday high of $7.88, before retreating into the red -- despite upbeat attention from the brokerage bunch overnight. At last check, the stock was off 0.3% to churn near $7.82.

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