Nokia Options Bears Win Big After Earnings

NOK's weekly 10/25 5.50-strike put has been popular in recent weeks

Oct 24, 2019 at 9:57 AM
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Nokia Oyj (NYSE:NOK) stock has plunged 21.3% to trade at $4.02 -- earlier hitting a six-year low of $3.98 -- after the Finnish telecom network equipment maker cut its 2019 and 2020 profit guidance, citing rising costs associated with 5G technology and margin pressures. NOK also said it will temporarily suspend its dividend payment until its cash flow stabilizes near 2 billion euros.

It's been a rough stretch on the charts for NOK stock, which was already down 12% year-to-date heading into today's trading. Plus, the $5.80 region has served as stiff resistance alongside the equity's 200-day moving average since a late-April bear gap. Today's drop puts the shares on track for their biggest one-day percentage loss on record.

Nokia options traders have been bracing for more downside. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), NOK's 10-day put/call volume ratio of 2.05 ranks in the 100th annual percentile, meaning puts have been bought to open over calls at an accelerated clip.

Drilling down, the weekly 10/25 5.50-strike put saw the biggest increase in open interest over this two-week time frame, with nearly 44,000 contracts added. Data from Trade-Alert indicates a number of these weekly puts were bought to open yesterday for an average price of $0.49. Amid today's bear gap, the bid price on these puts was last seen at $1.46, meaning options traders are staring at a substantial paper profit.

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