Bears Pounce On Struggling QUALCOMM, Inc. (QCOM)

QUALCOMM, Inc. (QCOM) is seeing a rare rush of put buying today

by

Published on Mar 11, 2015 at 2:27 PM
Updated on Apr 20, 2015 at 5:32 PM

Despite receiving a price-target hike to $78 from Exane BNP Paribas, QUALCOMM, Inc. (NASDAQ:QCOM) is sitting 1.9% lower following reports that competitor Intel Corporation (NASDAQ:INTC) will supply Apple Inc. (NASDAQ:AAPL) iPhones with modem chips starting next year -- replacing QCOM. Amid these developments, intraday put volume on the San Diego-based firm has ramped up to nearly quadruple the average amount.

Digging deeper, short-term options traders are active, as half of the stock's 10 most active contracts expire at week's end. Taking the top position is the weekly 3/13 71-strike put, and data suggests some buy-to-open activity is transpiring. By scooping up these puts, the traders are betting QCOM will extend its drop south of $71 through Friday's close, when the series expires. At last check, the shares were perched at $70.53.

This bearish betting stands in stark contrast to what we've observed lately. Specifically, QCOM's 10-day call/put volume ratio across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is 4.02 -- with calls quadrupling puts. What's more, this ratio outstrips 89% of similar readings from the previous 12 months.

However, put buying makes sense in light of QUALCOMM, Inc.'s (NASDAQ:QCOM) long-term history on the charts. Since topping out at $81.97 in late July, the shares have skidded 14%. A capitulation among option bulls could also exacerbate selling pressure.

Daily Chart of QCOM since July 2014


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