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Despite today's sympathy swoon, QUALCOMM, Inc. (NASDAQ:QCOM - 64.16) option traders are gambling on a rebound. In afternoon action, the tech concern has seen around 51,000 calls change hands -- more than doubling its average intraday call activity. For comparison, just about 18,000 QCOM puts have crossed the tape.
Most popular have been the weekly 1/25 65-strike call and the February 67.50-strike call, which have seen roughly 6,700 and 23,900 contracts exchanged, respectively. The majority of the calls crossed at the ask price, and volume has exceeded open interest at both strikes, suggesting the options are being bought to open.
More specifically, the weekly calls have traded at a volume-weighted average price (VWAP) of $0.19, meaning the buyers will profit if QCOM rebounds north of $65.19 (strike plus VWAP) by tomorrow's closing bell, when the options expire. Meanwhile, the VWAP of the front-month calls is $0.49, indicating a breakeven level of $67.99 -- in territory not explored since mid-April. However, even if QCOM extends today's retreat -- brought on by less-than-stellar earnings from Apple Inc. (NASDAQ:AAPL) -- the buyers' maximum risk is the premium paid at initiation.
From a broader sentiment standpoint, though, today's optimistic attitude is par for the course 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 QCOM calls for every put during the past two weeks. What's more, the stock's 10-day call/put volume ratio of 4.28 stands just 2 percentage points shy of a 52-week peak, implying that speculators are establishing bullish bets over bearish at a near annual-high clip.
In similar fashion, the equity's Schaeffer's put/call open interest ratio (SOIR) of 0.62 tells us that calls comfortably outnumber puts among options expiring within three months. Compared to similar readings of the past year, this ratio ranks in the 12th percentile, suggesting near-term options traders are much more call-biased than usual.
At last look, QCOM has surrendered 1.1% to hang out in the $64.16 region. As such, the shares are in danger of ending south of their 10-day moving average for the first time in 2013.
Off the charts, QUALCOMM is slated to unveil its own quarterly earnings report after the closing bell on Wednesday, Jan. 30.