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Nokia Corporation (ADR) (NYSE:NOK) followed the broader equities market south yesterday, shedding nearly 3%. Nevertheless, calls were the clear options of choice, outpacing puts by a roughly tenfold margin. Short-term contracts were in demand, too, as evidenced by a 9.2% rise (to 35.9%) in the stock's 30-day at-the-money implied volatility.
Most active was NOK's August 8 call, where close to 4,300 contracts changed hands. The majority appear to have been bought to open for a volume-weighted average price (VWAP) of $0.13, making at-expiration breakeven $8.13 (strike plus VWAP). Additional gains will accrue north of here, while the most the traders risk losing is the initial premium paid, should the tech stock be perched below the strike at the close on Friday, Aug. 15 -- when the back-month options expire.
Within the call's lifetime -- specifically, on Thursday, July 24 -- NOK is slated to report second-quarter earnings. This isn't necessarily a good thing for Tuesday's call buyers. Historically, while the company has matched or topped analysts' bottom-line estimates in each of the past eight quarters, the shares have averaged a loss of 3.8% in the subsequent week. This time around, the Street expects a per-share profit of 6 cents from NOK.
On the charts, Nokia Corporation (ADR) (NYSE:NOK) has struggled since hitting a three-year high of $8.35 on June 18. Specifically, the shares have given back 10.5%, and now trade at $7.47.