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Nokia Corporation (ADR) (NYSE:NOK) -- which could unveil new devices this week, if rumors prove accurate -- has been more popular than usual among option bears. During the past two weeks, speculators on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open NOK puts over calls at an annual-high clip, as evidenced by the stock's 10-day put/call volume ratio of 1.40, which stands higher than all comparable readings from the past year.
In the same vein, NOK has already seen around 5,800 puts cross the tape so far today -- a 20% mark-up to its average intraday volume, and more than double the number of calls exchanged. Traders are taking a shine to short-term contracts, as the equity's 30-day at-the-money (ATM) implied volatility (IV) is 6.1% higher at 55.7%.
A good chunk of the action has transpired at the May 7 put, where roughly 3,500 contracts have traded -- 91% at the ask price, hinting at buyer-driven volume. Plus, IV on the put is up 2.7 percentage points, pointing to the initiation of new positions.
By purchasing the puts at a volume-weighted average price (VWAP) of $0.45, the buyers will make money if NOK is trading south of $6.55 (strike minus VWAP) at the close on Friday, May 16, when the back-month options expire. From the stock's current perch at $7.42, it would take a drop of 11.7% in order for the shares to breach breakeven, which stands in territory not charted since October. Risk is limited to the initial premium paid for the puts, should NOK remain atop the strike through the options' lifetime.
Despite today's increasing ATM IV, short-term options on Nokia Corporation (ADR) (NYSE:NOK) remain attractively priced, from a historical perspective. The security's Schaeffer's Volatility Index (SVI) of 50% stands just 8 percentage points from a 12-month nadir, suggesting short-term options are relatively inexpensive right now.