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Option Brief: After notching a 14-year peak of $79.72 yesterday in the wake of a price-target hike at Jefferies, shares of QUALCOMM, Inc. (NASDAQ:QCOM) are taking a breather this afternoon, down 0.1% at $78.96. In the stock's options pits, though, calls are the contracts of choice -- outpacing puts by a more than 3-to-1 margin.
The most active strike is the May 82.50 call, where 6,503 contracts are on the tape. The lion's share of this volume occurred in one fell swoop, when a block of 4,060 contracts went off closer to the ask price for $0.92 each. Implied volatility ticked higher at the transaction, and volume outstripped open interest, pointing to the purchase of new positions.
Considering QCOM hasn't traded north of the strike price since January 2000, delta for the call is docked at 0.28, suggesting a 28% chance of an in-the-money finish at the close on Friday, May 16 -- when back-month options expire. Should the stock stay south of the strike price over the next seven weeks, the most the speculator stands to lose is the initial cash outlay, or $373,520 in the case of today's call buyer (premium paid, times number of contracts, times 100 shares per contract).
Fundamentally speaking, Tessera Technologies, Inc. (NASDAQ:TSRA) today said it has dropped its nearly seven-year-old litigation against QUALCOMM. The two companies will now consider potential collaborations.
Additionally, QUALCOMM, Inc. (NASDAQ:QCOM) is slated to unveil its earnings report on Wednesday, April 23. The company has matched or exceeded analysts' bottom-line estimates in six of the past eight quarters, with the stock posting an average gain of 0.4% and 1.2% in the subsequent day and week, respectively. For QCOM's fiscal second quarter, Wall Street is calling for a per-share profit of $1.22 -- a 4.3% improvement over its year-ago results.