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QUALCOMM, Inc. (QCOM) Option Buyers Foresee an Earnings Flop

QCOM speculators are picking up short-term, bearish bets

by 1/28/2014 12:18 PM
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Option Brief: QUALCOMM, Inc. (NASDAQ:QCOM) is slated to report fiscal first-quarter earnings after the closing bell tomorrow. It seems option traders are gambling on a poorly received earnings report, a la Apple Inc. (NASDAQ:AAPL), with roughly 12,000 puts crossing the tape so far today -- more than double the stock's average intraday put volume.

Garnering notable attention has been the near-the-money February 72.50 put, which has seen more than 1,900 contracts change hands at a volume-weighted average price (VWAP) of $1.77. The majority of the puts traded on the ask side, and implied volatility is trending higher, hinting at newly bought bearish bets. In order to profit, the put buyers need QCOM to breach $70.73 (strike price minus VWAP) by options expiration on Friday, Feb. 21. From the stock's current perch at $72.23, it would take a drop of about 2.1% in order to hit breakeven. Delta currently stands at negative 0.50, suggesting near-even odds of the puts being in the money at expiration.

Today's put buying marks a change of pace among QCOM speculators. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open nearly 3.3 calls for every put during the past two weeks. This ratio stands higher than 72% of all other readings in the past year, pointing to a healthier-than-usual appetite for long calls of late.

At last check, QUALCOMM, Inc. (NASDAQ:QCOM) (an Apple chip supplier) is swooning in sympathy with AAPL, down 1.2%. Historically, the company has matched or exceeded Wall Street's bottom-line earnings estimates in six of the last eight quarters, averaging a one-week, post-earnings gain of 1.4%.


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