One of the penny stocks stands out like a sore thumb.
The company has global brand recognition, a market cap of $ 35 billion, and currently has some of the richest bets in the entire options market.
If you are a millennium old, you probably know this company because you spent hundreds of hours in high school playing “snake” on their devices.
Without further ado, let’s take a quick look at a nostalgic retail favorite … Nokia (NYSE: NOK).
Nokia posted a surprisingly strong first quarter result last Thursday with revenue up 9% and gross margin of 37.8%. They also showed a net cash position of EUR 3.7 billion ($ 4.4 billion) and a comparable operating margin of 8.5%.
The most explosive blow, however, was the number that matters most to any shareholder, earnings per share, which came in at a whopping $ 0.08 compared to analyst estimates of $ 0.01.
The company’s standout quarter is largely due to the growth of 5G, an area Nokia seeks to be a leader in, and so far this is evidence of that. While they are no longer making phones (instead licensing their well-known brand names for phones made by HMD), Nokia is still developing vital infrastructure tools for the future of 5G.
The follow-up to the price movement has been strong so far: the stock rose 17% in three days. However, a closer look at NOK’s option chain reveals that the meteoric surge may only be just beginning.
Million dollar option bets
Oversized option bets, illustrated by large open interest (OI) on contracts, can give traders an indication of where the market whales believe future price movements will go.
While no one has a crystal ball and open interest is never a guarantee of impending move, it is certainly a notable denominator when looking at the performance of a stock price.
NOK stands out from the crowd in the options market. For months, call buyers have been pushing their way, buying hundreds of thousands of out-of-the-money contracts (valued at tens of millions of dollars) while the stock plummeted and implied volatility plummeted.
The sheer volume of the contracts, coupled with the dollar value of the positions, is really remarkable when you look at it together:
You don’t need to know anything about the options market to see the strength of Nokia call buyers’ conviction.
These contracts are asset depreciation with the option to expire worthless, but dealers are still almost laying out $ 100 million behind their belief that NOK shares will exceed $ 5, 7, or even $ 10 by their respective expiration dates.
We can consider the possibility that there is a massively leveraged hedge fund behind these deals. However, this could also be partly explained by retailers’ fascination with the stock.
For several months now, retailers on WallStreetBets have been referring to Nokia as an undervalued recreational game ripe for monstrous profits.
Is it possible that the astute “autistic” of #WSB are behind these massive bets? Are they going to use this spectacular earnings catalyst as a club to punish option sellers?
While it would certainly be a token for the subreddit, we can only speculate for now.
Now that Nokia has made spectacular gains, as the volume of stocks and calls has soared to short-term highs, the table is set for an addicting game of tug of war.
Grab your popcorn, do your due diligence, and keep an eye on Nokia for the weeks and months to come.
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