Pre-Earnings Nokia Corp (ADR) (NOK) Put Volume Nears Peak Levels

Nokia Corp (ADR) (NYSE:NOK) will unveil its quarterly earnings report tomorrow, and put volume is accelerated ahead of the event

by Karee Venema

Published on Oct 26, 2016 at 3:14 PM
Updated on Oct 26, 2016 at 3:16 PM

Put traders are blasting Nokia Corp (ADR) (NYSE:NOK), as the Finland-based tech firm prepares to report quarterly earnings tomorrow. Nearly 7,900 put options have traded on NOK stock so far -- four times the expected intraday amount of 1,859, and on track to arrive in the 95th annual percentile. At last check, NOK stock was up 3.4% at $5.14, and its weekly 10/28 5-strike put was in high demand.

Specifically, this near-the-money put has seen the most attention in today's trading, with 6,440 contracts on the tape. There appears to be a mix of buying and selling activity occurring, with traders possibly initiating new positions ahead of tomorrow's scheduled event.

If this is the case, put buyers expect NOK to breach $5 by Friday's close -- when the weekly series expires -- while put writers are betting on the strike to serve as a short-term floor. Sellers could also be hoping for a post-earnings volatility crush, considering implied volatility at this strike has surged 25.6 percentage points to 111.6%.

More broadly speaking, NOK options traders have shown a growing appetite for long puts relative to calls in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio has spiked to 1.72 from 0.50 in the past two weeks. What's more, the current ratio ranks in the 90th annual percentile, meanings puts have been bought to open over calls at a near-annual-high clip.

Outside of the options arena, short interest fell 12.8% in the two most recent reporting periods, and now accounts for less than 1% of NOK's available float. However, with the stock down 27% year-to-date, it's likely some of this action was a result of short sellers cashing in their winning bets. In fact, NOK hit a three-year low of $4.88 earlier this month, after a sympathy swoon with sector peer Telefonaktiebolaget LM Ericsson (NASDAQ:ERIC) prompted backlash from the brokerage bunch.

Drilling down on Nokia Corp's (ADR) (NYSE:NOK) past post-earnings performances, it's been a mixed bag. The stock has moved lower in the session subsequent to reporting four of the past eight quarters, including two consecutive drops in August and May. On average, NOK stock has swung 6% the day after it report -- less than the 9.2% move the options market is pricing in this time around.

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