On a mostly flat day in the tech market Thursday, shares of Finnish telecom company Nokia (NOK) sold off more than 15%, as the bears took control a day before June 16 options expire, and punished the stock brutally.
Blue chips like Apple (AAPL) and Microsoft (MSFT) felt no market swoon, moving less than 1%, but Nokia led the way down in tech as RF Micro Devices(RFMD), Sapient (SAPE), Exide Technologies (XIDE), and Lattice Semi (LSCC) all gave up at least 4%. (Source: Google Finance)
|Nokia Corporation (ADR)||NOK||Price $2.35||-0.44 (-15.77%)|
|Lattice Semiconductor||LSCC||Price $3.85||-0.64 (-14.25%)|
|Exide Technologies||XIDE||Price $2.85||-0.16 (-5.32%)|
|Sapient Corporation||SAPE||Price $10.61||-0.57 (-5.10%)|
|RF Micro Devices, Inc.||RFMD||Price $4.11||-0.20 (-4.64%)|
The options market though was where the real dreams were made and crushed. Nokia crossed below the crucial $2.50 barrier and the puts and calls with a $2.50 strike swung wildly. Previously in the money June 16 $2.50 calls looked to be safely ITM heading into Thursday, but as Nokia gave up almost a sixth of its valuation, the call option turned dimes turned into pennies falling 90% from 30 cents to 3.
It paid to own the $2.50 puts on this day though, what was once a 2 cent dead-option-walking about to expire worthless turned a mammoth 650% one-day gain:
The days leading up to options expiry are often battlegrounds fought for what are obviously huge stakes. Trading values take leave of the company beneath the stock and big short-term bets take over the tape. It can be tempting to try for one of these big paydays betting on a surge in a left-for-dead option, but unless you are the money manager swinging these stocks, a better investment might be stuffing your money into bags, putting it on a rocket, and shooting it into the Sun.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.