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Option Brief: BlackBerry Ltd (NASDAQ:BBRY) on Friday bounced off support in the $9 region, which has emerged as a technical foothold for the shares since their Jan. 21 bull gap. The smartphone maker finished the week at $9.31, and option buyers are either rolling the dice on more upside, or hedging their bearish bets.
Specifically, the out-of-the-money (OOTM) April 11 call was most popular among non-expiring options on Friday, with 4,345 contracts across the tape. Ninety-six percent of the calls changed hands on the ask side -- primarily in mid-to-large blocks in the final half-hour of trading -- and open interest rose by more than 3,800 contracts over the weekend. In other words, it appears speculators bought the calls to open.
For the "vanilla" call buyers, the goal is for BBRY to topple $11 -- in territory not explored since September -- by April options expiration. In fact, the buyers will profit if BBRY is north of $11.28 (the strike plus the volume-weighted average price of $0.28) when April-dated options expire. Risk, meanwhile, is limited to the initial premium paid for the calls.
However, considering BBRY has outperformed the broader S&P 500 Index (SPX) by 47.5 percentage points during the past three months, and that short interest accounts for 22.3% of the stock's float, it's possible that short sellers were hedging their positions with OOTM calls. By purchasing the calls to open, the skeptics can limit losses, should BlackBerry Ltd (NASDAQ:BBRY) extend its longer-term rally.