Legal Drama Lures Ericsson (ADR) (ERIC) Bulls

One Ericsson (ADR) (ERIC) trader is rolling the dice on a move north of $14

by Andrea Kramer

Published on Feb 27, 2015 at 1:41 PM
Updated on Jun 24, 2020 at 10:16 AM

Swedish tech issue Ericsson (ADR) (NASDAQ:ERIC) has seen major call volume today, after the firm ramped up its patent infringement dispute with Apple Inc. (NASDAQ:AAPL) -- just two days after the iPhone maker suffered a legal defeat. Against this backdrop, it looks like some option players are gambling on new highs for ERIC within the next few months.

Intraday call volume is running at 19 times the norm, with nearly all of the action attributable to a sweep of roughly 3,500 contracts at the October 14 strike. The buyer bought the contracts to open at a volume-weighted average price (VWAP) of $0.49, placing at-expiration breakeven at $14.49 (strike plus VWAP) -- territory not charted since July 2011. Should the equity remain south of $14 through October options expiration, the most the trader will lose is the initial premium paid for the calls.

Today's appetite for Ericsson (NASDAQ:ERIC) calls is just more of the same for the stock, which was last seen 0.5% higher at $12.95. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day call/put volume ratio of 84.17 stands 13 percentage points from an annual high, pointing to accelerated call buying of late.

Weekly Chart of ERIC since May 2011

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