Stocks quoted in this article:
QUALCOMM, Inc. (NASDAQ:QCOM) -- a chip supplier for Apple Inc. (NASDAQ:AAPL) -- has shed over 3% this morning to trade at $67.78. Meanwhile, activity in the company's options pits has been heavy, with a total volume of around 60,000 contracts -- that's compared to a typical intraday volume of 16,000.
The option most frequently changing hands is QCOM's near-the-money September 67.50 put, as over 10,000 contracts have traded at the strike. In addition to a block of 5,500 contracts -- which was likely sold to open as part of a neutral-to-bearish buy-write strategy -- a healthy portion of the puts crossed at the ask price, suggesting they were bought. Implied volatility is slightly higher, and volume has surpassed open interest at the strike, which -- combined with data from the International Securities Exchange (ISE) -- communicates some of the bearish bets were newly minted.
In order for the buyers to profit off of the Toq maker, its shares must continue to lose ground. Specifically, based on the volume-weighted average price (VWAP) of $0.80 paid for the long puts, the stock must dip below $66.70 (strike price minus the VWAP) by Sept. 20, when the front-month options expire. No matter what happens, the most today's bettors have on the line is the initial premium paid. That's a relatively cheap sum, too, considering QCOM's Schaeffer's Volatility Index (SVI) of 19% ranks in the 14th percentile of its annual range -- although that is likely to change, as the equity's 30-day, at-the-money implied volatility is up 2.0 percentage points, or 10.3%, to 21.8% today.
On the charts, QUALCOMM, Inc. (NASDAQ:QCOM) is a long-term laggard, up less than 10% year-over-year. That has changed of late, with the shares outpacing the broader S&P 500 Index (SPX) by roughly 13 percentage points during the past two months. However, QCOM is currently testing support at its 10-day moving average, which has largely served as an ally since early July, but has previously presented a stern level of resistance.
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