Nokia Corp. (NOK) –
Investors in the Finnish cellphone-maker who have watched its share
price halve from its optimistic February peak were thrown a lifeline on
Monday after Google said it would buy a Motorola division. The purchase
of its Mobility unit was quickly pounced on by Nokia bulls after a
spokesman for the company said "we use Windows too!" Shares in Nokia
recovered by 12% on Monday to trade at $6.00 after Nokia said that the
Google decision vindicated its decision to stick with Windows
technology. The move, said Nokia, could serve up a "massive catalyst"
for the entire Windows Phone ecosystem. Option traders jumped at the
chance of a reevaluation for the industry in light of the recent slump
especially in Nokia's fortunes, where executives earlier stopped making
forecasts in light of ever-tougher competition from Apple and
Blackberry. Investors predicted that Nokia might gain as much as 50%
over the coming two months and paid an average of 10 cents for rights to
buy shares by October. Calls at the $9.00 strike started the day with
less than a one-in-10 chance of landing in the money by expiration but
still investors keep snapping them up – volume so far stands at 16,642
lots.
Research in Motion (RIMM) – Blackberry-maker
RIMM also tagged along for the ride on Monday after National Bank
Financial analyst Kris Thompson suggested that Google's Motorola
purchase crystallized the issue of patents. Google's defense of its
Android strategy by widening the net of its outstanding number of
patents might focus investors on a floor for Research in Motion. The
company earlier acquired thousands of wireless patents from now bankrupt
Nortel Networks, which could be valued at $10 billion and compare to a
market value of $13 billion at its current $25.70 share price. Option
buyers looking at the Google deal as an industry catalyst reached higher
up the ladder for RIMM, whose shares have been capped below $30.23
since June 24. Dealers looked to the September expiration $31 strike
where 2,600 call options granting buying rights were purchased for an
average 57 cents compared to almost 1,200 lots sold during the session.
Undeterred by the day's bullish news some bears still needed convincing
and with last week's $21.60 intact put buyers paid an average of 31
cents for 1,800 puts conveying the right to sell.
American Electric Power (AEP) –
The power company had a shocking week – share-price wise at least. Its
swift slump to $33.09 set a fresh 52-week low as investors' fears
capitulated and began pricing in a doomsday scenario. Its shares have
since recovered to $37.00 on Monday as buyers returned while one option
trader has been active. The dealer appears to be rolling over what could
be a collar strategy on the stock shifting from this week's expiring
August contract out to November's expiry. The investor appears to be
long of puts and short of calls in a strategy that would protect against
a downside slump below $33.00 by expiration. The investor presumably
has an established long position in the underlying shares and by using a
short call position can determine an exit price on a further rally for
the stock. The August $38 strike was formerly that point, although in
rolling forward to November the investor has softened to the $37 strike
presumably as the market has become more challenged.