) -- An investor expressed moderate bullishness on
Thursday by purchasing a call spread.
The investor bought the Feb. 14-15 call spread more than 18,000 times for around 20 cents per spread. At this cost, the investor needs NOK shares to expire higher than $14.20 at February expiration, unless of course the call spread appreciates with the shares prior to expiration and the investor decides to sell the spread back out.
Shares of NOK currently are trading around $12.92, unchanged on the day. Implied volatility of the February 14 calls is currently 33.7, and the 15 calls have an implied volatility of 33. This compares to a 63 day realized volatility of 35.
Open interest in both the 14 and the 15 calls is more than 35,000 contracts. This is on top of this same spread that was purchased Wednesday, also for around 20 cents, bringing the two-day total to more than 53,000 spreads.
This February call spread takes into consideration NOK's earnings, which are likely to be announced in mid-January. The shares have underperformed the S&P 500 by about 40% in 2009.
However, this negative trend in the stock could be the bull case for this call spread: that is, the stock has reached an over-sold condition, and could be due for a relief rally.
-- Written by Jud Pyle in Chicago
At the time of publication, Pyle did not have a position 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."