Qualcomm (QCOM) Option Traders Unconvinced

QUALCOMM, Inc. (QCOM) and China have settled an antitrust probe

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Published on Feb 10, 2015 at 12:01 PM
Updated on Apr 20, 2015 at 5:32 PM

QUALCOMM, Inc. (NASDAQ:QCOM) is on a tear around midday, adding 4.4% following the confirmed resolution of an antitrust investigation in China. The news has been met with applause from the analyst crowd, as BMO, Nomura, RBC, and FBR each upped their price targets on the stock. However, one group of options traders remains skeptical.

Taking a quick step back, QCOM calls are crossing at roughly three times the usual intraday rate, and triple the number of puts on the tape. However, not all of this activity is bullish in nature. Among the most active options is the weekly 3/6 72.50-strike call, which appears to be seeing sell-to-open activity. In other words, these call writers are banking on QCOM to remain below $72.50 through the close on Friday, March 6, when the weekly series expires. The equity hasn't toppled this level since late January, prior to a guidance-induced bear gap, and was last seen dancing near $70.

Over the past two weeks, call writing has been a popular strategy at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). In fact, 28,797 QCOM calls have been sold to open over the previous 10 days, more than doubling the 14,053 bought to open.

As alluded to, QUALCOMM, Inc. (NASDAQ:QCOM) has agreed to pay a record-breaking $975 million fine to Chinese authorities to end a 14-month antitrust probe, though the company called the terms "better than feared." In addition, the firm is being required to lower the royalty rates it charges on patents.

Daily Chart of QCOM since November 2014


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