Buying in BlackBerry (BBRY) Call Options Triggered by Ford Auto Move

Monday is set to be the first day in February during which BlackBerry (BBRY) options will trade on volume in excess of 100,000 contracts. With its stock currently trading 8.5% higher at $9.93, options activity has gravitated towards bullish plays. One argument bolstering the stock price is that it is an unwitting beneficiary of Facebook’s (FB) recent purchase of WhatsApp? Last week. The social media giant paid $42 per user and the suggestion is that having determined it will maintain its BlackBerry Messaging system across all platforms, similar valuation could be applied to its army of loyal customers. However, the more likely catalyst is Ford’s decision to ditch its currently used in-car tech system from Microsoft (MSFT) for that of QNX Software Systems, which is owned by BlackBerry. That move announced by Ford (F) over the weekend will kick off in 2016.

But buyers appear not to be left waiting to see what the impact might be. The chart below shows that shares in BlackBerry have not traded at $11.00 since September and that was before the stock fell to earth tumbling by half to touch below $5.50 in December. Now, however, those persistently bullish on the corporate revamp are looking for a return to $11.00 by March options expiration. Almost 20% of Monday’s options activity took place at the 11.0 strike where 17,000 contracts changed hands as the cost of the right to lock-in to the stock at that price doubled to 30-cents per contract. In the upper right of the chart you can see the Probability Distribution for the price by that time. Currently, the market is assigning just below a one-in-four likelihood that BlackBerry will settle above $11.00 at that time. While the day is not yet done, strong volume on its shares might suggest the sound of returning investors to BlackBerry. One would think that a test above $10.00 for its shares might provide a stronger base from which to build. And should that happen, the odds of a jump to $11.00 will surely shorten as options premiums continue to rise.

Chart – BlackBerry options argue three-to-one against a close above $11.00 by March expiration

(click to enlarge)

About Andrew Wilkinson 1023 Articles

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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