NQ Mobile Inc (NQ) Call Options Stay Hot Amid M&A News

Call volume is accelerated on NQ Mobile Inc (ADR) (NYSE:NQ) following the company's M&A news

by Josh Selway

Published on Mar 24, 2016 at 2:26 PM
Updated on Jun 24, 2020 at 10:16 AM

Mark down NQ Mobile Inc (ADR) (NYSE:NQ) as yet another stock surging on M&A news today. The China-based telecom firm is up 8.7% today at $4.73, on news that it's selling a 22% stake in FL Mobile. This price action brings NQ's year-to-date lead to 30%, setting the stock up for its best close since July. In the meantime, activity has picked up in NQ's options arena. 

By the numbers, call volume is running at three times the average intraday clip, and currently arrives in the 95th percentile of its annual range. The most popular option by far is the weekly 3/24 4.50-strike call, though it appears traders may be closing newly in-the-money positions here. The September 3.50 call is also seeing heavy activity, and if traders are opening long positions here, they're betting on extended gains from NQ over the next several months. 

Such interest in calls isn't unusual for the stock's speculators. Over four calls have been bought to open for every put during the past two weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Plus, NQ's Schaeffer's put/call open interest ratio (SOIR) comes in at 0.43, meaning call open interest more than doubles put open interest among options set to expire within the next three months. 

At the same time, this preference for calls may have something to do with NQ Mobile Inc's (ADR) (NYSE:NQ) elevated short-interest levels. Specifically, the 6.8 million shares controlled by short sellers represent more than seven sessions' worth of buying power, at NQ's average daily trading volumes. As such, it's possible that these bears have been using call options as a way to hedge their positions during the stock's strong technical performance in 2016. 

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