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QUALCOMM Option Players Place Short-Term Bullish Bets

QCOM's Dec. 14 62.50-strike put is seeing sold-to-open activity today

by 12/10/2012 12:08 PM
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Calls are slightly outpacing puts on QUALCOMM, Inc. (NASDAQ:QCOM - 64.02) in today's session. More than 3,900 call contracts have crossed the tape so far, compared to around 2,900 puts. This trend is a continuation of the behavior witnessed by option players in recent weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). During the course of the past 10 sessions, traders have bought to open 380 calls for every 100 puts. This call/put volume ratio of 3.80 ranks just three percentage points from a 52-week peak, indicating bullish bets have been scooped up over bearish at a near annual-high clip.

In today's trading, though, a number of option players are using puts to place their bullishly slanted bets on QCOM. One of the most active strikes of the day is QCOM's 12/14 62.50-strike put, which has seen around 1,000 contracts trade. The majority of these weekly options have crossed at the bid price, and open interest at this strike consists of only 195 contracts. In other words, it is safe to assume a portion of this activity is of the sell-to-open variety.

By writing these out-of-the-money puts, traders expect QCOM to stay north of the $62.50 mark through the end of the week. In this best-case scenario, the options will expire worthless, and the speculators can pocket the initial net credit of $0.13, which Trade-Alert indicated was the volume-weighted average price (VWAP). Should QCOM breach this level by Friday, the speculators may have to buy the stock for $62.50 per share, regardless of how low the stock is trading.

On the charts, QCOM has fared well in 2012, with the shares adding roughly 17% in that time. More recently, an earnings-induced surge in early November placed the stock above its 10- and 20-day moving averages. These trendlines have ushered QCOM higher since Nov. 8, and today's put sellers are hoping this double-barreled layer of support continues to hold through week's end (the 20-day trendline is currently perched at $62.75).

At last check, the stock had tacked on 0.2% in today's session to hover near $64.02.


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