Telefonaktiebolaget LM Ericsson (ERIC) Edges Higher on Anti-Corruption Talk

Swedish telecom Telefonaktiebolaget LM Ericsson (ERIC) is trading higher as the company meets with shareholders

by Kirra Fedyszyn

Published on Jun 23, 2016 at 10:45 AM
Updated on Jun 24, 2020 at 10:16 AM

Sweden-based telecommunications specialist Telefonaktiebolaget LM Ericsson (NASDAQ:ERIC) is up 0.6% at $7.96 this morning, as the company meets with shareholders to discuss its anti-corruption program. ERIC has come under fire during the past week, as it was named in corruption probes both in the U.S. and in Greece. On the charts, the stock has been trying to recover from a seven-year low of $7.21, tapped on June 14. Because Sweden is a member of the European Union (EU), today's upbeat price action for ERIC could be a result of the "Brexit" vote, as polls are showing the "remain" camp with a lead.

On the technical front, ERIC has been a long-term laggard, shedding 27.6% year-over-year. But if the stock can keep its upward momentum going through Friday, it should close above its 10-week moving average for the first time since mid-April.

The brokerage bunch has taken a clearly pessimistic view of ERIC. In fact, all eight analysts following the stock rate it a "hold" or "strong sell." However, short sellers have been backing off of ERIC, with their bearish bets falling by more than 17% over the two latest reporting periods. Short interest currently accounts for a slim 0.4% of the stock's available float.

ERIC's options volume generally runs quite light, but traders have nonetheless shown a strong preference for puts in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders bought to open roughly three ERIC puts for each call during the last 10 trading days.

A similarly put-heavy trend is evident among short-term traders, per the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.72 -- higher than 81% of the past year's readings. And this preference for puts is even more pronounced among near-the-money options in the July series. Telefonaktiebolaget LM Ericsson's (NASDAQ:ERIC) front-month gamma-weighed SOIR of 3.32 shows put open interest more than tripling call open interest.

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