Total option activity in Qualcomm (QCOM) is tracking at more than 300% above normal late in Friday’s session and in the process, securing the top spot for unusual volume within the Naz’ 100 (QQQ). Of todays near 90,000 contracts, calls are heavily favored by a margin of 7.5-to-1.0 over puts. Implieds have seen a very modest uptick in front of the weekend, but remain settled just off two-plus month lows and fair-to-cheaply valued relative to QCOM’s underlying movements.
Most active and accounting for a full 60% of Friday’s volume is what appears to be a good deal of spread and outright trading in the October 60 and 65 calls with volume totals off 18,000 and 31,000 respectively. With residing open interest of 32,000 and 39,000, the initiating or closing of positions becomes a bit more complicated.
Our best guesstimate is with shares of QCOM stationed at the 65 strike and 35 calendar days remaining on those contracts, many traders could be rolling up long call positions to lock in profits while retaining upside exposure. Of notice and what would amount to a modest but large deviation on the straight up, one-for-one roll, a ratio spread using 13,920 October 60s for $5.46 was placed against 17,398 October 65s for $1.75.
Technically, shares of QCOM have improved upon Thursday’s breakout from a three-to-four week consolidation pattern set between the 50% - 62% retracement within a six-month cup-shaped corrective base which could have traders optimistically looking for a retest of base highs near 69, while reducing net dollar exposure through this type of roll adjustment.
Baidu (BIDU) is in the No. 2 spot with activity of nearly 100,000 contracts. Shares of BIDU are up about 5.0% but still woefully underperforming the broader indices and just now challenging its 50SMA from below. Looking at the board, option traders are concentrating their efforts closing, opening and likely scalping the expiring at-the-money September Weeklys 115 call with volume of 10,600 compared to open interest of 5,200.
Garnering very similar interest, the regular September 115 and 120 call have seen 11,900 and 11,700 contracts trade compared to open interest of 9,100 and 12,900. The stats fall short of giving us any definitive clues on positioning, but given potential technical resistance and short time left on the clock, the closing of long contracts and / or bearish verticals priced for $2.00 and worth just $0.81 intrinsically at 115.81, are likely attracting some interest today.
Figure 1: Apple (AAPL) Long Call
And finally, Apple (AAPL) or what this strategist calls the iShares Bull ETF is seeing above-average, but not-so-unusual activity for a product known to dazzle option traders with its interest. Intraday, more than 920,000 contracts have traded with calls on top by a fairly standard 1.5-to-1.0 margin. Very speculative, fast money favor has found its way into the surrounding money 680 – 700 September Weeklys with net call and put volume approaching 400,000.
Longer-term, but about the amount of time it takes for an apple to go bad, the regular September 700 call has seen heavy trading of 45,000 versus open interest of 27,000. With ‘just’ 20,000 of the 690 and 695 calls and 14,000 705 calls traded; we can’t help but think that contract is tasting a little bitter for more than a few bulls biting into premium as shares attempted a first half move towards $700 before backing off. Shown above is an illustrated one lot, long call position purchased at Friday’s session range high of $7.40 per contract.
Senior Options Writer, former Market Maker & fulltime Option Hedge Hog Advocate
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The information offered here is based upon Christopher Tyler’s observations and strictly intended for educational purposes only, the use of which is the responsibility of the individual.