Options Strategy For QUALCOMM, Inc. (QCOM), Bay Crest Bets Big On Stock

Bay Crest Partners Equity Derivatives Strategist Anshul Agarwal shared tips with viewers on how to play the “options market” in general given the near record highs observed on the S&P 500 (INDEXSP:INX) and drilled down into the prospects of the options put out by telecom infrastructure services provider QUALCOMM, Inc. (NASDAQ:QCOM).

Mr. Agarwal said that the market rally has been driven by strong earnings being reported by companies.

“Last week there were concerns about Geo-political concerns in Ukraine and Israel, but right now, as of today the markets is fully focused on earnings. Stocks are moving based on earnings and we are seeing huge moves in stocks where the implied moves are quite low,” he added.

Mr. Agarwal also gave specific trading tips to investors on QUALCOMM, Inc. (NASDAQ:QCOM).

“My strategy is a Call Spread, stock is breaking out from its six months range right now, based on some note by Cohen analyst yesterday. It was up 2.5% yesterday,” he said

Mr. Aggrawal also said that he wants to buy August 15 ‘82.5 Call’ at 90 cents and sell 86 August 15 Call spread, and pay around 90 cents to a dollar for it.

He then went on to say that QUALCOMM, Inc. (NASDAQ:QCOM) stock moves by about 3.5 percent on an average post earnings and based on historical data for the last nine quarters, then the trade would give him a good risk reward.

QUALCOMM, Inc. (NASDAQ:QCOM) reported its third quarter results yesterday after the market close. The highlights of the results have been the $6.8 billion revenue generated by the company which was up by 9% YoY basis, and the GAAP EPS was $1.31, up by 46 percent on YoY basis and 15 percent on QoQ basis. QUALCOMM, Inc. (NASDAQ:QCOM) also raised its EPS guidance for the full year 2014.

Bay Crest’s derivatives analyst also went on to point out that large cap names like Apple Inc (NASDAQ:AAPL) and Microsoft Inc (NASDAQ:MSFT) were “moving less than the implied moves on upside.”  On being questioned by the Bloomberg TV presenter if this depicted a lack of clarity in the investor thought, Mr. Agarwal said that, “I think it is just people  trying to figure out at where the stock is going to settle, and they are playing to adjust their positions based on what places they have put on, ahead of earnings. Sentiment was bullish going in, but it turned out to be not so bullish as a result, initially the first reaction was to get out of positions and then to hedge in again.

Disclosure: none