Nokia Calls In Play
Investors in the option market appear to be displaying signs of confidence in management?s ability to boost networking and equipment revenues at Nokia (Ticker: NOK) beyond the jettison of its mobile unit to Microsoft. Nokia?s core business is now connecting increasing amounts of wireless devices to networks. Its shares rose by 0.81% to $7.50 midweek while notable option activity saw investors boosting optimistic bets that Nokia?s share price will rise above $8.00 by October expiration. Investors already hold 16,800 contracts at that strike where more appear to be building significant positions on Wednesday. As implied volatility slipped by 4.29% to 38.21%, call buyers paid around 46-cents to acquire 17,100 bullish options on the stock as it once again rebounded from support around the $7.00 area.
The following chart uses the IB Probability Lab to display what Nokia option bulls are inferring about the likelihood of a rise in the share price by expiration. The option market is currently pricing in a 31.4% chance that shares in Nokia will settle above $8.00 in October. Taking the side of the call option buyers, by moving the forward price to at least $8.00 shows the chance of that happening rising to 46.4%, which has significant implications for whether option strategies would or would not be profitable.
Chart ? Implied Probability Distribution based upon Nokia?s share price growing to $8.00 by October (Click To Enlarge)
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