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The shares of QUALCOMM, Inc. (NASDAQ:QCOM - 61.80) are flying in the face of broad-market headwinds, prompting some options traders to cash in their bullish chips. Meanwhile, other speculators are gambling on limited short-term upside for the tech stock.
At last check, QCOM has seen roughly 53,000 calls change hands -- about three times its average intraday call volume. One of the most active contracts has been the now in-the-money November 60 call, which has seen more than 7,700 contracts traded. More than half of the calls have crossed at the bid price, and volume has yet to surpass open interest, underscoring our suspicions of post-earnings profit taking. Furthermore, according to Reuters, Goldman Sachs advised clients to sell the November 60 calls they'd bought for roughly $1.41 earlier in the week, with the contracts now bid around $2.80.
Meanwhile, the stock's out-of-the-money weekly 62.50-strike call has seen nearly 8,000 contracts traded on open interest of fewer than 3,700, pointing to an influx of new positions. What's more, the bulk of the soon-to-expire calls changed hands at the bid price, suggesting they, too, were sold. By writing the calls to open, the sellers are expecting QCOM to remain south of $62.50 through tomorrow's close. In this best-case scenario, the calls will expire worthless, allowing the sellers to retain the entire premium received at initiation.
Elsewhere, other option bulls are taking a more conservative route to call a top for QCOM. So far today, the security has seen roughly 37,000 puts cross the tape -- about four times the norm. Most popular has been the out-of-the-money November 62.50 put, which has seen more than 5,400 contracts exchanged on open interest of fewer than 3,800 contracts. However, the majority of the puts have traded at the ask price, hinting at buy-to-open activity.
By purchasing the puts to open, the buyers -- like the weekly call sellers -- are expecting QCOM to stay beneath the $62.50 marker. By buying puts instead of selling calls, though, the traders are not only allowing another week for their predictions to pan out, but are also risking less, since the maximum potential loss on a long put is the initial premium paid. In order to profit on the play, the put buyers need QCOM to backpedal beneath the $61.42 level (strike minus volume-weighted average price of $1.08) by next Friday, when November-dated options expire.
From a sentiment standpoint, QCOM has plenty of fans likely cheering today's rally. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock sports a 10-day call/put volume ratio of 3.13, indicating that traders have bought to open more than three QCOM calls for every put during the past two weeks. What's more, this ratio registers in the 76th percentile of its annual range, implying that option buyers have scooped up bullish bets over bearish at a faster-than-usual clip recently.
Elsewhere, even before today's jump on the charts, analysts were optimistic regarding QCOM. The stock boasts 28 "strong buys" and five "buy" endorsements, compared to two lukewarm "holds" and not a single "sell" or worse recommendation. Plus, the average 12-month price target on the security sits at $70.90 -- in territory not charted in more than 12 years.
In afternoon trading, QCOM was last seen 6.3% higher to wink at the $61.80 level. As such, the stock is on pace to settle atop its 200-day moving average for the first time in a month.