Nok stock: Large Option Traders Making Aggressive Bets On GameStop, Nokia

 Feb. 2, 2021

Here is the article. 

My notes:

1. 10,000 Nokia call options, each call 100 shares, 1 million share, call option, $5 strike price, $1.36 million bullish bet. 
2. Another 1.4 million bullish bet - $5 strike price
3. Shares of Nokia spiked from under $4 to as high as $9.79 before dropping back down to around $4.50 on Tuesday.
4. The $1.4 million Nokia call purchase has a break-even price of $6.40, suggesting at least 40.9% upside for the stock over the next two years.

At 10:39 a.m., a trader bought 10,000 Nokia call options with a $5 strike price expiring in January 2023 at the ask price of $1.36. The trade represented a $1.36 million bullish bet.

At 11:02 a.m., a trader bought another 10,000 Nokia call options with a $5 strike price expiring in January 2023 at the ask price of $1.40. The trade represented a $1.4 million bullish bet.

Why It's Important: Even traders who stick exclusively to stocks often monitor option market activity closely for unusually large trades. Given the relative complexity of the options market, large options traders are typically considered to be more sophisticated than the average stock trader.

Many of these large options traders are wealthy individuals or institutions who may have unique information or theses related to the underlying stock.

Unfortunately, stock traders often use the options market to hedge against their larger stock positions, and there’s no surefire way to determine if an options trade is a standalone position or a hedge. In this case, given the relatively small size of the largest PayPal trades by institutional standards, they were likely not institutional hedges.

Short Squeeze Volatility: GameStop and Nokia are two of the popular stocks that WallStreetBets and other retail traders have targeted in recent weeks in triggering short squeezes in some of the most shorted stocks on Wall Street.

In the past month, shares of Nokia spiked from under $4 to as high as $9.79 before dropping back down to around $4.50 on Tuesday.

Even prior to the pandemic, both companies were struggling. In 2019, Nokia reported just $7 million in profits, its first positive net income since 2015. 

The WallStreetBets community helped drive a short squeeze in GameStop and other stocks that ultimately led to Robinhood and several other brokers limiting or banning buys of the most volatile stocks. The squeeze also hit hedge funds that were short GameStop and others extremely hard. Melvin Capital reported a 53% loss for the month of January and was forced to take $2.75 billion emergency investment from Citadel and Point72 Asset Management.

Benzinga’s Take: The two largest GameStop option trades are short-term in nature, suggesting they are plays on the current short squeeze. The Nokia call purchases, on the other hand, don’t expire for nearly two years and maybe bets on the strength of the company’s underlying business.

The $1.4 million Nokia call purchase has a break-even price of $6.40, suggesting at least 40.9% upside for the stock over the next two years.

GameStop

GameStop’s 2019 revenue was down 3% and it reported a net loss of $673 million.