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Unusual Call Activity on Qualcomm Before Earnings

Josh Selway

Qualcomm, Inc. (NASDAQ:QCOM) continues to trade near multi-year highs after being released from the grip of its long-time court battle with Apple (AAPL). QCOM stock was last seen trading at $87.06 with earnings due out after the close tomorrow, Wednesday, May 1, and there's notable call activity taking place in the options pits. Calls are outpacing puts by a more than 3-to-1 ratio, and there appears to be bullish spread action involving the May 90 and 95 calls. In short, it's likely traders are using the short-term contracts to bet on the shares rallying up to $95.

Looking more broadly, the options market is pricing in quite a volatile move for Qualcomm after earnings, relative to what we've seen from the security in recent years. Specifically, traders are expecting an 8.1% swing for Thursday's trading, which is more than double the average post-earnings move of 3.5% from the past two years. Meanwhile, we've already pointed out that QCOM tends to underperform drastically in May.

Two other stocks seeing heavy call trading ahead of their earnings releases tomorrow are Fitbit Inc (NYSE:FIT) and Garmin Ltd. (NASDAQ:GRMN). FIT, which also reports post-close on Wednesday, has seen twice the number of calls cross today, compared to what was expected, thanks to heavy trading at the May 5.50 and 6.50 strikes. New positions are being opened at each call, suggesting traders could be betting on a run higher for the shares, which were last quoted at $5.27.

FIT has been extremely volatile after earnings in recent years, averaging a one-day move of 13% in the past eight quarters, including an almost 14% slide last quarter. This time, the options market's pricing in a 17.8% swing for Thursday's trading.

As for GRMN, just 940 calls have crossed today, but that's still already more than the daily average. Most popular is the weekly 5/3 87-strike call, followed by the weekly 5/10 89-strike call. Garmin actually reports before the open on Wednesday, and bulls will be hoping for more of the same earnings success we've seen in recent quarters from the stock, as it's gained the day after earnings in four straight quarters, including a 17% surge in February. The stock was last seen at $85.82.