Stocks quoted in this article:
Option Brief: QUALCOMM, Inc. (NASDAQ:QCOM) reached a decade-plus high of $74.69 yesterday, after receiving a price-target hike to $85 from $74 at Barclays. Not surprisingly, the stock's call options were in high demand, with about 58,000 contracts crossing the tape. This was more than triple QCOM's average daily call volume, and around double the number of puts exchanged.
However, not all of Wednesday's call activity was of the bullish variety. Approximately 8,100 contracts changed hands at the February 80 strike -- the majority of them at the bid price, suggesting they were sold. Meanwhile, open interest surged by 5,051 contracts overnight, confirming the initiation of new short positions.
By selling the calls to open, the traders are expecting the equity to remain south of the strike price through February options expiration. This would render the contracts worthless, and allow the speculators to pocket the initial premium collected. However, should QCOM muscle north of this level by the close on Friday, Feb. 21, the call sellers might find themselves on the hook to deliver the shares at $80 apiece, no matter how high the stock rises. This could also be reflective of a covered call strategy, in which case the traders may be shareholders looking to generate some income on their positions.
Technically, the security has advanced close to 15% year-over-year to trade at $74.15. Fundamentally speaking, QUALCOMM, Inc. (NASDAQ:QCOM) is slated to report fiscal first-quarter earnings after the market closes on Wednesday, Jan. 29, and has exceeded or matched analysts' bottom-line estimates in six of the past eight quarters.