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Not surprisingly, options players have rushed to the Nokia Corporation (ADR) (NYSE:NOK) pits, on news that the Finnish telecom firm is selling its handset business to Microsoft Corporation (NASDAQ:MSFT). More than 377,000 option contracts have already traded today, outpacing typical intraday levels by a factor of 29.
With the stock up 35.7% at $5.30 -- after earlier pegging a new 18-month high at $5.58 -- call volume is leading the charge. Nearly 313,000 calls have changed hands, versus less than 65,000 puts. In addition, 14 of the top 15 most active strikes are on the call side, with activity on both the buying and selling sides.
Most active is the January 2015 5-strike call, where roughly 56,000 contracts have changed hands. This LEAPS strike is also home to today's largest block trade; 49,950 calls traded in one fell swoop at the ask price of $0.94 (and were tied to a stock trade). Given the existing open interest of roughly 65,000, this block could be the work of call sellers buying the position to close after today's sharp move.
The put seeing the most attention, conversely, is the January 2014 4.50 strike, where more than 9,000 contracts have traded, the majority off the bid price. Data from the International Securities Exchange (ISE) indicates that at least some of this volume consists of customers selling the options to close.
Now that news of the $7.2 billion deal has hit the Street, Nokia Corporation (ADR) (NYSE:NOK) is seeing a drop in its implied volatility measure. The stock's 30-day, in-the-money reading has fallen 3.3 percentage points, or almost 7%, to 46.1%. Over the previous week, the reading had moved from 39.1% (on Aug. 23) to 49.4% last Friday.