NQ Mobile Inc. (NQ) Bulls Bet On Post-Earnings Gains

NQ Mobile Inc (ADR) (NQ) has historically tanked following earnings


Published on Mar 17, 2015 at 1:21 PM
Updated on Apr 20, 2015 at 5:32 PM

A number of notable companies will report earnings tomorrow, including China-based telecom issue NQ Mobile Inc (ADR) (NYSE:NQ). Ahead of this event, the stock's calls are in high demand, running at 1.7 times the usual intraday clip.

Seeing the most attention is NQ's weekly 3/27 3.50-strike call, where it seems traders are buying to open in-the-money positions. In so doing, the speculators anticipate the shares will continue climbing north of $3.50 through the close on Friday, March 27, when the weekly series expires. More specifically, based on the volume-weighted average price (VWAP) of $0.60, the bullish bettors need NQ to topple the breakeven mark of $4.10 (strike plus VWAP) by the end of next week.

This optimism is surprising for a couple different reasons. For one, despite the fact NQ has rallied 3.7% today to trade at $3.97, the stock has shed more than 80% of its value over the last year. For another, the equity's post-earnings price action is scary-bad, historically speaking -- on average, the equity has declined 6.9% in the session following its past eight quarterly reports. More recently, NQ plummeted 18.7% in the day subsequent to its mid-December earnings release.

One group that's banking on a repeat of history after tomorrow night's report is short sellers. Nearly one-fifth of NQ Mobile Inc's (NYSE:NQ) float is sold short, which represents more than three weeks' worth of trading activity, at average daily volumes.

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