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QUALCOMM, Inc. (QCOM) Option Traders Make a Gutsy Call

QUALCOMM, Inc. has not traded north of $85 in more than 14 years

by 4/1/2014 11:24 AM
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Option Brief: QUALCOMM, Inc. (NASDAQ:QCOM) is trending higher along with the broader equities market today, up 2% at last check to trade at $79.78. In the stock's options pits, calls are trading at nearly three times the intraday average. Diving deeper reveals the majority of call traders are upping the bullish ante over last Friday's speculators and betting on a move to levels not seen since January 2000.

Of the 20,000 calls on the tape thus far, almost 69% have crossed at the June 85 strike. Almost all of the 13,726 contracts traded -- including one large block of 8,262 -- went off at the ask price, implied volatility is up, and volume is easily outstripping open interest. Summing it all up, it appears these positions are being bought to open.

As mentioned, QCOM hasn't traded north of $85 in more than 14 years. Not surprisingly, delta for the call is docked at 0.22, suggesting a roughly 1-in-5 chance the position will be in the money at the close on Friday, June 20 -- when the options expire. This also means that for every dollar QCOM gains, the value of this call will rise by $0.22 (all other factors being equal). Conversely, for each dollar loss QCOM experiences, the call's value will drop by $0.22.

On the charts, QCOM has been moving steadily higher since hitting an annual low of $59.02 last July, with the shares up 35%. What's more, the equity hit a fresh 14-year high of $79.85 today. Off the charts, QUALCOMM, Inc. (NASDAQ:QCOM) will report quarterly earnings on Wednesday, April 23. The equity could be poised to continue its streak of higher highs, considering that over the past eight quarters, QCOM has averaged a gain of 0.4% and 1.2% in the day and week, respectively, following the scheduled announcement.


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