Are NQ Mobile Inc (ADR) (NQ) Shorts Hedging With Call Options?

NQ Mobile Inc (ADR) is surging following news of an $80 million buyback program

by Karee Venema

Published on Dec 23, 2014 at 12:33 PM
Updated on Apr 20, 2015 at 5:32 PM

NQ Mobile Inc (ADR) (NYSE:NQ) is soaring today -- up 24.3% at $4.30 -- following the company's latest fundamental development. Specifically, NQ's board of directors approved an $80 million share-buyback program. Today's bullish gap is most likely being met with mixed reactions on the Street, with sentiment split in and out of the options arena.

In NQ's options pits, for example, the stock's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 5.83 ranks in the 84th annual percentile. Simple stated, calls have been bought to open over puts at an accelerated clip in recent months.

Likewise, NQ's Schaeffer's put/call open interest ratio (SOIR) of 0.27 ranks lower than 98% of similar readings taken in the past year. In other words, short-term speculators have rarely been as call-skewed toward the equity as they are now.

Outside of the options arena, however, short interest accounts for 14.8% of the equity's available float, and it would take nearly seven sessions to cover these bearish bets, at average daily trading volumes. In light of this, some of the recent call buying -- particularly at out-of-the-money strikes -- may have been at the hands of short sellers hedging against an unexpected rally.

Regardless, now is an opportune time to buy short-term options on NQ Mobile Inc (ADR) (NYSE:NQ). Per the equity's Schaeffer's Volatility Index (SVI) of 117%, which ranks in the 30th annual percentile, premium on NQ's front-month options is pricing in relatively low volatility expectations at the moment.

A Schaeffer's exclusive

6 Sectors for Summer

Access your FREE insider report before it's too late!



NEW! Explore Schaeffer’s Partners' deals and get connected to top online brokerages with deals tailored exclusively for our readers.  Get answers to your questions regarding transfer fees, commission rates, programs and available discounts related to online trading services.

MORE | MARKETstories

Huge New Legal Marijuana Market Has Shortage Crisis
250 million Europeans have access to medical marijuana. There's already a shortage....
J M Smucker Stock Jammed by Ugly Sales Outlook
J M Smucker's fourth-quarter profits and revenue were better than Wall Street expected
NIO Rises on Record-Breaking Deliveries
Nio stock hit a record high in vehicle deliveries for May
The Next Big Player in U.S. MJ Boom
Most pure-play marijuana stocks in the U.S. trade on the Over-the-Counter stock exchange.