Call Buying in Qualcomm: Options
CHICAGO (
) --
Qualcomm
(QCOM) - Get Report
did not announce significant news Friday, but at least one investor is taking a bullish stance on the communication equipment name and boosting call volume.
The near-the-money Oct. 45 calls have changed hands nearly 24,000 times so far today and are home to current open interest of 7,200 contracts. These calls are down 18 cents so far on the day. This computes to an implied volatilety of 29.8.
The volume-weighted-average price of these calls is about $1.30, meaning bullish investors who bought the Oct. 45 calls need QCOM shares to expire higher than $46.30 to make money, unless of course the calls rise prior to expiration following a pop in the shares and the investor chooses to sell them to take profits.
During afternoon trading, QCOM shares are trading down 42 cents, or nearly 1%, to $44.60. The Oct. 45 calls have a delta of 47 cents, meaning for every dollar move in the underlying, these options should climb 47 cents. That means these calls should have dropped 20 cents, but call-buying activity is pushing the prices slightly higher. It's interesting that call buyers are present on a day when QCOM shares broke to new two-month lows.
Call buying like this does not automatically mean investors should stock up on QCOM shares. The company's stock has remained relatively in range throughout the last few months (QCOM saw a recent low of $43 and climbed to $48 in July), but at least one investor is looking for further upside throughout the next month.
-- Written by Jud Pyle
At the time of publication, Pyle did not hold any positions in the stock mentioned. Jud Pyle, CFA, is the chief investment strategist for Options News Network. Pyle started his career in finance in 1994 as a derivative analyst with SBC Warburg. After four years with Warburg, Pyle joined PEAK6 Investments, L.P., in 1998 as an equity options trader and as chief risk officer. A native of Minneapolis, Pyle received his bachelor's degree in economics and history from Colgate University in 1994. As a trader, Pyle traded on average over 5,000 contracts per day, and over 1.2 million contracts per year. He also built the stock group for all PEAK6 Investments, L.P. hedging, which currently trades on average over 5 million shares per day, and over 1 billion shares per year. Further, from 2004-06, he managed the trading and risk management for PEAK6 Investments L.P.'s lead market-maker operation on the former PCX exchange, which traded more than 10,000 contracts per day. Pyle is the "Mad About Options" resident expert. He is also a regular contributor to "Options Physics."
