RIMM – Research in Motion Ltd. – Options on the Blackberry maker are a hot ticket item today ahead of the firm’s second-quarter earnings report scheduled for release after the closing bell this afternoon. Frenzied trading ensued right out of the gate this morning with investors heavily trafficking in September and October contract call and put options. Shares are currently up 1.1% at $46.02 as of 1:45 pm ET, but earlier rallied as much as 2.3% to reign in an intraday high of $46.58. The overall reading of options implied volatility on the stock increased 5.1% in the first half of the session to top out at 58.22%, but has come off to stand just 2.6% higher on the day at 56.82%. Although more than 1.7 call options changed hands for each single put on RIMM thus far in the session, it does not appear that most traders are taking bullish stances ahead of the earnings report. Furthermore, call buyers observed populating RIMM could be hedging short positions in the underlying shares. According to one Bloomberg article this morning, “bets against shares of Research in Motion Ltd. have doubled since April” as traders position for the Blackberry maker’s shares to continue to slide lower on steep competition from mobile making rivals, Apple and Google. RIMM’s shares, at the current price of $46.02, are down 40.00% since March 29, and off 47.75% from its September 23, 2009, 52-week high of $88.08. The most congested areas in RIMM options today are in September $50 strike calls and October $50 strike calls. Significant volume in September contract out-of-the-money puts is notable, as well. As of 2:05 pm ET, more than 34,000 calls changed hands at the September $50 strike, and upwards of 30,700 calls were exchanged at the $50 strike expiring in October. More than half of the volume in those calls was generated by call sellers. Not all of the trading was bearish though as a number of investors were seen selling out-of-the-money put options in the October contract. Additionally, call buying at out-of-the-money strike prices could be the work of speculators looking for earnings to beat expectations. The rapid pace and heavy volume in RIMM options, the rally in shares, and increased volatility on the stock ahead of earnings may also have attracted a good deal of intraday players who do not intend to hold positions through earnings. As of 2:15 pm ET, traders exchanged more than 243,000 contracts on the Blackberry manufacturer.
Affiliation: Interactive Brokers
Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.
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