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Option players are picking up Nokia Corporation (ADR) (NYSE:NOK) puts at a faster-than-usual clip this morning. Already today, the telecom concern has seen roughly 12,000 puts cross the tape -- 1.37 times its average intraday volume. For comparison, fewer than 6,000 NOK calls have changed hands thus far.
Almost half the put action has transpired at the near-the-money November 6 strike, where 5,900 contracts have traded. Most of the puts crossed in mid-sized blocks at the ask price of $0.13, and implied volatility was last seen slightly higher, hinting at buy-to-open activity.
By purchasing the puts, the buyers either expect NOK to retreat from its current perch of $6.70 and breach the $6 level, or they're hedging their long stock positions in case of a downturn. The "vanilla" put buyers will profit if NOK violates $5.87 (strike price minus VWAP) within the next few weeks. The goal of the protective put buyers is for NOK to extend its uptrend -- the stock is just south of two-year highs -- but the contracts lock in an acceptable price ($6) at which to sell the shares, should NOK retreat. In either case, risk is capped at the initial premium paid for the puts.
Now is an opportune time to purchase Nokia Corporation's (ADR) (NYSE:NOK) short-term options. The stock's Schaeffer's Volatility Index (SVI) of 40% sits just 6 percentage points from an annual low. In other words, NOK's near-term contracts are inexpensive right now, historically speaking.
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