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QUALCOMM, Inc. (QCOM) Expected to Topple Round-Number Resistance

QUALCOMM, Inc.'s weekly 5/9 80-strike call was bought to open yesterday

by 5/6/2014 9:37 AM
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Bulls have been active in QUALCOMM, Inc.'s (NASDAQ:QCOM) options pits of late, as evidenced by data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Over the past 50 sessions, in fact, 141,237 long calls have been initiated, compared to 48,686 puts, resulting in a call/put volume ratio of 2.90. Even more telling, this ratio ranks in the 95th percentile of its annual range, meaning calls have been bought to open over puts with more rapidity just 5% of the time within the past year.

This bullishly skewed activity among option players comes as the stock dances around the round-number $80 level -- and flirts with decade-plus-high territory. Specifically, thanks to a lift from its rising 60-day moving average, shares of QCOM have rallied nearly 35% from their July 9 annual low of $59.02. More recently, quick bounces off this rising trendline have helped QCOM secure a string of higher highs -- including a 14-year peak of $81.66 on April 21.

An earnings-related drop less than two weeks ago once again brought the shares south of $80, but that didn't stop a number of speculators in Monday's session from betting on a quick move north of this level by week's end. Amid yesterday's light-volume session, one of the more active QCOM contracts was the weekly 5/9 80-strike call. The majority of the 1,727 contracts traded here did so on the ask side, implied volatility edged 1.6 percentage points higher, and open interest added the most of any contract, collectively pointing to buy-to-open activity.

On Monday, QUALCOMM, Inc. (NASDAQ:QCOM) topped out at $79.92 in intraday action, before eventually settling at $79.56. While yesterday's closing price sits just 0.6% below the aforementioned strike, delta at Monday's close was docked at 0.38, or 38%. Simply stated, the options market is giving the call a less than 2-in-5 chance of an in-the-money finish at Friday's close -- when the weekly options expire. Should the equity fail to retake the $80 level by week's end, though, the most buyers of the weekly 5/9 80-strike call stand to lose is the initial premium paid. According to Trade-Alert, the volume-weighted average price for the calls was $0.32 apiece.


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