'Unexpected Positive' Rewards Nokia Corp (NOK) Call Buyers

Nokia Corp (ADR) (NYSE:NOK) options volume is accelerated following the company's agreement with Samsung

Josh Selway
Jul 13, 2016 at 10:42 AM
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Nokia Corp (ADR) (NYSE:NOK) is on the rise today amid heavy volume, thanks to news the telecom company is expanding its patent agreement with Samsung. The move has been well-received by analysts, with Morgan Stanley describing the deal as an "unexpected positive," and BMO Capital similarly calling it a "meaningful positive." The stock was last seen 4.2% higher at $5.83, and more importantly, is set for its first close above the 100-day moving average since its early February bear gap. Looking at NOK options data, though, speculators may have mixed feelings about today's price action.  

To be more specific, NOK options traders have taken a strong liking to call buying in the past 10 weeks. This is according to NOK's 50-day call/put volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which comes in at a whopping 25.73 -- higher than 94% of the past year's readings. 

However, when you change the scope to look at open interest for options that expire within three months, this call bias disappears. In fact, NOK's Schaeffer's put/call volume ratio (SOIR) of 1.35 ranks in the 79th annual percentile. In other words, short-term options traders are more put-skewed than normal. 

Either way, it looks like a good time to pick up Nokia options on the cheap. For instance, the stock's Schaeffer's Volatility Index (SVI) of 33% ranks in the low 18th annual percentile -- meaning the options market is pricing in historically low volatility expectations at the moment. Traders are taking advantage today, too, as NOK options are crossing at twice the normal intraday pace. 

Taking a quick look across Wall Street, analysts have a mostly upbeat outlook on Nokia Corp (ADR) (NYSE:NOK) -- even though the shares remain 13.4% lower year-over-year. Six brokerage firms consider NOK at least a "buy," and none recommend selling the stock. Moreover, the average 12-month price target for Nokia stock comes in at $7.04, which represents a nearly 21% upside move for the shares.

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