Qualcomm (NASDAQ: QCOM, Stock Forum) manufactures and markets digital wireless communication products. After hitting a five-year high of $55 back in August 2008, the shares have seen a decline (like the rest of the market) of more than 35%. Yesterday, however, at least one investor was willing to bet the stock would sit in a range between now and March.
Yesterday, an investor sold over 14,000 of the March 30-40 strangles for around $1.75. That means the investor is selling the March 30 put and the 40 call simultaneously. In this case, they are selling the 30 put for around 65 cents and the 40 call for around $1.10.
So why might the investor be selling this strangle? Well, for starters, they stand to make a maximum profit of $1.75 if the stock is between 30 and 40 at March expiration. Since the decline in the shares from the $55 level last August, the stock has not closed any lower than $29.21, which is the level it reached at the bear-market lows of November 20. The stock has also been hard pressed to close above $40. Even back in late October, when the market was charging higher just prior to Election Day, the peak close in QCOM was $39.72 on October 30.
Another thing that is interesting with this trade is that the investor is showing no fear in the face of upcoming earnings from QCOM. Earnings for QCOM are scheduled to be this Wednesday, January 28, after the market closes. Despite that potential catalyst for a move, the investor is still selling this strangle.