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QUALCOMM, Inc. Option Players Stay Optimistic

QCOM bulls are buying front-month call options

by 1/14/2013 10:41 AM
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Despite this morning's pullback, QUALCOMM, Inc. (NASDAQ:QCOM - 64.00) option traders remain optimistic. In early action, the tech concern has already seen roughly 10,000 call options exchanged -- a 32% mark-up to its average intraday call volume. For comparison, fewer than 4,000 QCOM puts have changed hands.

Most of the action has transpired at the January 2013 65-strike call, which has seen more than 6,300 contracts traded. Ninety-two percent of the calls have crossed at the ask price, and implied volatility was last seen 4.1 percentage points higher, hinting at buy-to-open activity.

By purchasing the calls to open, the buyers are expecting QCOM to muscle back atop the $65 level by the end of the week, when front-month options expire. More specifically, the calls changed hands at a volume-weighted average price (VWAP) of $0.23, indicating a breakeven level of $65.23 (strike plus VWAP). Nevertheless, should QCOM continue to swoon in sympathy with Apple Inc. (NASDAQ:AAPL), the most the buyers stand to lose is the initial premium paid for the calls.

From a broader sentiment standpoint, bullish betting is nothing new for QCOM. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open more than four calls for every put during the past two weeks. In fact, the security's 10-day call/put volume ratio of 4.02 stands just 2 percentage points from a 52-week peak, suggesting speculators are initiating bullish bets over bearish at a near annual-high clip.

At last check, the shares of QCOM have given up 1.4% to linger in the $64 vicinity, and are in danger of ending south of their 10-day trendline for the first time since Dec. 31.


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