Phone
Speculation that Nokia will rise pushed the number of bullish options on the stock to almost double the level of bearish ones, the highest ratio in about a year, according to data compiled by Bloomberg.
The contracts may pay off should Nokias earnings surprise investors this month after the company reported its first quarterly loss in October. Chief Executive Officer Olli-Pekka Kallasvuo is scheduled to give the Jan. 8 keynote speech at the Consumer Electronics Show in Las Vegas. The wagers come after Fitch Ratings cut Nokias credit ranking on Dec. 21 and the shares trailed the Standard & Poors 500 Index by 41 percentage points in 2009, the most ever, data compiled by Bloomberg show.
“Investors are betting that Nokia cant continue to get things wrong,” said Michael Yoshikami, chief investment strategist at YCMNet Advisors in Walnut Creek, California. The firm manages about $1 billion and owns Nokia shares. “The iPhone has been a wake-up call for them and they are starting to show that they understand the market has changed.”
Nokia, based in Espoo, Finland, has faced slumping consumer demand and mounting competition from Cupertino, California-based Apple Inc.s iPhone. Google Inc., the Mountain View, California- based owner of the most popular Web-search engine, introduced its own smartphone this week, the Nexus One.
ADRs Slip
American depositary receipts of Nokia slipped 0.8 percent to $13.15 in New York trading yesterday, extending a 19 percent retreat over the past year. Its share of the smartphone market, the industrys fastest-growing sector, fell to 39.3 percent in the third quarter from 42.3 percent a year earlier, while Apple and Research In Motion Ltd., the Waterloo, Ontario-based maker of the BlackBerry, gained, according to research firm Gartner Inc. in Stamford, Connecticut.
Nokia, which said last month its share of the total handset market will be little changed this year, is releasing new touch- screen phones and improved applications to win customers back. Analysts expect the company to earn 16 euro cents (23 cents) a share in the period ended last month, reversing a loss of 15 euro cents the previous quarter.
Laurie Armstrong, a spokeswoman for Nokia, didnt immediately return a call seeking comment.
“The fourth quarter is shaping up to be a little bit healthier than they thought,” said Jeff Kvaal, a New York-based analyst at Barclays Plc, in an interview.
Oppenheimer & Co. analyst Ittai Kidron in New York raised his estimate for last quarters device volume to 121 million from 118 million in a report this week.
Call Spread
“Buying that spread could offer a way to gain relatively inexpensive exposure in the event shares rally significantly in the weeks after the CES show and the companys earnings release,” Jacobson said. “Given the consistency and the size of the trades I think its worth noting.”
Nokias Helsinki-based shares trade for 12.8 times analysts forecasts for profit in 2010, less than half its average valuation of 28.1 last decade, data compiled by Bloomberg show. The stock has fallen 68 percent from a six-year high of 28.60 euros in November 2007 after reporting it lost market share to Apple and RIM.
Open Interest
The open interest, or existing contracts, for Nokias February $15 calls jumped 155-fold to 35,228 on Dec. 30, the largest one-day gain among all Nokia options over the last two weeks, according to data compiled by Bloomberg and Trade Alert LLC, a New York-based provider of analytics. It rose to 55,567 on Jan. 5, the most recent data available. Open interest for February $14 calls has surged 12-fold since Dec. 29.
The overall open interest for all Nokia calls has risen 66 percent in the last week to 296,261 contracts, while put open interest has climbed 12 percent to 160,433.
“Reports on fourth quarter handset sales are coming in better than expected,” said Nirav Parikh, a senior vice president at Los Angeles-based TCW Inc., which manages $110 billion, including Nokia shares. “Thats possibly driving the optimism in the options markets because it can translate into better earnings.”