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Nokia Corporation (ADR) (NOK) Option Players Predict a Rough Week

NOK bears are buying puts with a one-week shelf-life

by 6/28/2013 2:14 PM
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Option bears have taken a shine to Nokia Corporation (ADR) (NYSE:NOK) today, with put volume accelerating to two times the norm. So far, the Finnish phone maker has seen roughly 17,000 puts change hands, compared to fewer than 10,000 calls. Digging deeper, most of the action has transpired at a weekly strike, suggesting the bears are gambling on a rough week for NOK.

More specifically, the weekly 7/5 3.50-strike put has seen more than 10,400 contracts traded at a volume-weighted average price (VWAP) of $0.03. The majority of the puts have exchanged at the ask price, and volume has outstripped open interest at the strike, hinting at newly bought bearish bets.

In order to profit on the play, the buyers need Nokia Corporation (ADR) (NYSE:NOK) to breach $3.47 (strike price minus VWAP) within the next week. From the stock's current perch at $3.75, it would take a retreat of 7.5% in order for NOK to hit breakeven. Should the stock stay north of the strike -- which coincides with its bullishly crossed 10-week and 20-week moving averages -- the most the buyers can lose is the initial premium paid.

However, pessimism is par for the course for NOK. Just four analysts consider the equity worthy of a "buy" or better rating, compared to six "holds" and seven "sell" or worse suggestions. Meanwhile, short interest spiked 11.3% during the past month, and now accounts for 6.2% of NOK's total available float. At the security's average pace of trading, it would take nearly 12 sessions to buy back all of these bearish bets.


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