Traders See Upside in Palm, Downside in Nokia
By TENNILLE TRACY
NEW YORK -- Options traders kept a close eye on mobile-phone makers and wireless-network providers, showing particular interest in Palm, Sprint Nextel and Nokia.
Traders flocked to Palm's options after analysts at Morgan Joseph downgraded the company to "sell," from "hold," saying sales of Palm's Pre phone appear to have slowed significantly.
But while analysts offered a cautious forecast, shares of Palm climbed higher and options traders gravitated toward bullish contracts.
Traders picked up 38,000 "calls" that allow them to buy the company's stock, compared with 17,000 "puts" that allow them to sell it, according to Trade Alert.
Traders focused mostly on September calls that convey the right to buy Palm's stock for $17. Priced at 25 cents, the contracts make money if the stock rises above $17.25 before expiration on Sept. 18, about 27% above the closing price of $13.55, representing a 5.5% gain.
Shares of Palm staged gains Thursday after slipping lower for most of August. They started the month near $16.
Meanwhile, in Sprint Nextel, the wireless-network provider that has exclusive rights to offer Palm's Pre phone, traders picked up 36,000 calls and 21,000 puts.
Trading in Sprint Nextel coincided with a study from J.D. Power & Associates that said the company had improved its customer service.
The bulk of activity took place in Sprint Nextel's August $4 calls, where a mix of both buyers and sellers congregated.
Those contracts are priced at 10 cents and make money if Sprint's stock rises above $4.10 before Aug. 21, a level it hit most recently on Aug. 5.
Sprint closed at $3.95, up 26 cents, or 7.1%.
There also was noteworthy volume in Nokia, the Finland-based cellphone maker that recently announced a partnership with Microsoft. Under that agreement, Microsoft will provide Office programs on Nokia phones.
In the options market, trading in Nokia took on a bearish tone as investors showed up to sell October $10 calls and buy October $15 puts.
Nokia shares closed the session lower -- down three cents, or 0.2%, to end at $13.16 -- pressured by a decision by Goldman Sachs to downgrade the company to "neutral," from "buy."
Elsewhere, traders scooped up bearish options in Amazon.com Inc., hoping to protect a portfolio of Amazon shares against declines or speculating on such moves taking place.
Traders focused on September $80 puts, which are priced at $2.65 and make money if Amazon dips below $77.35. The shares closed at $84.60, down 1.6%.
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