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Options Skeptic Gambles Against Nokia Corporation (ADR) (NOK)

Friday's main call writer expects little upside from Nokia Corporation (ADR) this week

by 6/9/2014 10:11 AM
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Option Brief: Nokia Corporation (ADR) (NYSE:NOK) call volume outpaced put volume by a healthy margin on Friday. However, not all of the calls were of the typical bullish variety. Indeed, it appears as though a substantial amount of the action at the session's most popular strike was neutral-to-bearish in nature.

Specifically, NOK's most active option was the weekly 6/13 8-strike call, where 3,000-plus contracts were exchanged. In fact, just after noon ET, a multi-exchange sweep of 2,500 contracts crossed at this strike at the bid price of $0.10 each, suggesting the calls were sold. What's more, open interest at the strike picked up nearly 2,600 contracts over the weekend, making it safe to assume the short bets were freshly initiated.

Friday's headline call writer collected a total premium of $25,000 (premium * number of contracts * 100 shares per contract) on the trade. This profit will be secured as long as NOK shares -- currently unchanged at $7.88 -- remain south of the 8 strike through this Friday's close, when the weekly options expire. However, if the stock rallies north of $8 between now and then, the short-term speculator risks being assigned.

Speaking of short-term speculation, Nokia Corporation's (ADR) (NYSE:NOK) 30-day at-the-money implied volatility spiked 4.6% on Friday to close at 33.9%, indicating elevated demand for front-month contracts (and higher premium prices, which is good news for option sellers). Meanwhile, on the charts, the equity slid 2%, but remains up more than 120% on a year-over-year basis.


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