Call volume popped yesterday on Research In Motion Limited (RIMM: sentiment, chart, options). During the course of the session, traders on the International Securities Exchange (ISE) bought to open 6,803 calls on RIMM, compared to just 1,187 puts. In other words, bullish bets outnumbered their bearish counterparts by a margin of 2.29 to one.
The day's upbeat bias simply continued a recent trend for RIMM. During the past five days, ISE option players have bought to open 18,598 calls on the stock, along with 10,751 puts. The security's five-day call/put volume ratio of 1.73 reveals that call purchases have nearly doubled puts within the past week.
Taking a slightly longer-term look, RIMM's 10-day ISE call/put volume ratio of 2.04 ranks higher than 82.7% of other such readings taken during the past year. This elevated reading suggests that speculative investors on the ISE have bought to open calls over puts at a faster pace less than 18% of the time.
These high hopes are also reflected in the stock's Schaeffer's put/call open interest ratio (SOIR), which arrived today at 0.60. This ratio indicates that calls nearly double puts among options set to expire within three months. Additionally, the current SOIR is docked in the 31st annual percentile, which means that short-term traders have been more optimistically aligned toward RIMM less than one-third of the time during the past year.
Focusing on Thursday's volume, the most active call was the July 70 strike. This soon-to-expire option saw 23,577 contracts cross the tape on open interest of 18,460, but most of the activity consisted of liquidations -- open interest at this strike arrived today at just 16,752 contracts, revealing that many traders were likely closing out their positions ahead of today's expiration.
Drilling down on newly bought-to-open positions, the July 75 strike drew some notable action on Thursday. Shortly before the closing bell, three blocks totaling 1,455 contracts changed hands at the ask price of $0.10, suggesting they were purchased. Open interest on this out-of-the-money option rose overnight from 21,148 contracts to 22,172, confirming that new call positions were added here yesterday.
However, it's worth noting that short interest on RIMM has also climbed. The number of shares sold short increased by 16.2% during the past month, and jumped by nearly 17% during the most recent reporting period. Now, these bearish bets account for 4.9% of the equity's available float. Rather than straightforward bullish speculation, it's possible that some of the recent call purchases were hedges on the part of short sellers.
On the charts, RIMM has fared rather well in 2009 -- the shares have added approximately 78% year-to-date. Unfortunately, the stock's rally has run out of steam in recent weeks; during the past 20 days, the security has underperformed the broader S&P 500 Index (SPX) by nearly eight percentage points.
As a result, the stock is now trading on the south side of its formerly supportive 10-week moving average. This trendline could potentially switch roles to act as resistance. Meanwhile, support from RIMM's 20-week moving average remains intact. This technical backstop nimbly contained the equity's recent dip.
Conversely, the stock's near-term peak was marked by its 20-month moving average. This trendline effectively halted RIMM's advance last month, establishing itself as a staunch resistance level. However, this roadblock isn't exactly an immediate threat, since it's hovering roughly 10 points north of the stock's current perch.
With RIMM rebounding off support at its 20-week trendline, traders should keep an eye on the stock's progress near its 10-week moving average. If this level switches roles to act as resistance, it could embolden short sellers to ramp up their stakes, thereby applying fresh selling pressure to the shares. On the other hand, a successful move back above this region might mean that the stock's path higher is clear -- at least, until RIMM meets back up with longer-term resistance in the low 80s.
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