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Option Brief: Call players have been notably active in Nokia Corporation's (ADR) (NYSE:NOK) options pits recently, and today's action is no different. By the numbers, around 74,000 calls have changed hands -- more than five times the intraday average, and almost nine times the number of puts exchanged. The demand for short-term options is evident, as NOK's 30-day at-the-money implied volatility (IV) is up 1.8% at 32.5%. With NOK rallying nearly 5% this afternoon to trade at $7.59, it appears one speculator in particular is gambling on an extended rise over the next two months.
The most active strike by a mile is NOK's July 8 call, where 65,498 contracts have changed hands. (As a point of comparison, the next most popular option has a mere 5,000 contracts on the tape.) Roughly two-thirds of the activity here occurred when a massive block of 44,423 contracts changed hands at an ask price of $0.16 apiece, hinting at buyer-driven activity. Plus, IV rose 1.1 percentage points at the transaction, conveying the initiation of new positions -- a theory also suggested by Trade-Alert.
Based on the initial premium paid, the trader will begin to realize a profit with each notch above breakeven at $8.16 (strike plus net debit) NOK is sitting at expiration. Meanwhile, her loss is limited to the initial cash outlay of $710,768 (44,423 contracts * $0.16 premium paid * 100 shares per contract), should NOK finish south of $8 at the close on Friday, July 18 -- when the options expire.
As touched upon, NOK is in rally mode this afternoon, after Jefferies upgraded the stock to "buy" from "hold," and raised its price target to 7.41 euros from 4.93 euros. Today's positive price action marks a change of pace for Nokia Corporation (ADR) (NYSE:NOK), which has been churning between $7 and $7.50 since mid-April.