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Qualcomm: Dialing Into the Smartphone Revolution


Shareholders' confidence in QCOM is well placed as it continues to outperform its competitors and dominate the LTE market.

The Qualcomm (NASDAQ:QCOM) share market has recently been hit with unusual bullish activity. Call volume is performing 17% stronger than usual, and has more than doubled total put volume today for a grand total of 33,000 calls and 12,000 puts. Qualcomm is up $.79 to $66.43 and it's most recent quarter showed a 24% increase in revenue to $6.1 billion. CEO Paul Jacobs says he expects these figures to steadily increase as the use of smartphones in the developing world continues to grow: "The emerging markets are clearly going to be a big growth story. But the developed markets continue to be strong. It's kind of split 50/50."

Speculators seem to agree with Jacobs since the market has been flooded with bullish activity. The most active strike has been the July 70 call, where 11,000 contracts have traded. The overall volume-weighted average price was $0.50, which was also the ask price per contract. QCOM's annual high is $68.50 and it is currently trading at $66.43, yet buyers are betting on it going over $70.50. Out of 28 firms that are following the stock, 23 firms have named it a "strong buy." Shareholders' confidence is well placed as Qualcomm continues to outperform its competitors and may dominate the LTE market for years to come.

Qualcomm knows how to spread the wealth and reward shareholders. Last month, the board replaced its $4 billion share repurchase authorization with a $5 billion repurchase agreement with no expiration date. Qualcomm will also realize a 21.5% annualized increased in its dividends by 2014. The new yield of 2.2% makes Qualcomm one of the most generous dividend payers in the tech sector.

My Trade: Buy the July QCOM 67.5 calls for about $1.28
Risk: $128 per 1 lot
Reward: Theoretically unlimited
Breakeven: $68.78

Greeks of the Trade:
Delta: Long
Gamma: Long
Theta: Short
Vega: Long

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