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BlackBerry Ltd (BBRY) Option Bulls Emerge Ahead of Earnings

BlackBerry Ltd will report quarterly earnings ahead of next Thursday's open

by 6/9/2014 9:49 AM
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Option Brief: On Friday, BlackBerry Ltd's (NASDAQ:BBRY) options pits were once again dominated by call players, with 17,000 calls on the tape at the close, compared to fewer than 6,400 puts. Short-term contracts were in high demand, as evidenced by the equity's 30-day at-the-money implied volatility (IV), which rose 3.6% to 54.6%. Specifically, a number of near-term traders targeted a move north of $8 over the next two weeks -- an area not traversed by BBRY since early May.

The most active BBRY option on Friday was the June 8 call, where 7,301 contracts changed hands -- mostly at the ask price, pointing to buyer-driven activity. Meanwhile, IV jumped 5.7 percentage points, and open interest rose the most of any strike over the weekend, making it safe to assume new positions were initiated. The options market is giving the call a roughly 2-in-5 chance of an in-the-money finish at next Friday's close -- when front-month options expire -- as delta closed at 0.40 on Friday.

This group of speculators may have been eyeing BBRY's impending earnings report, which will be released ahead of next Thursday's open. However, BBRY's historical post-earnings price action does not support the bullish case. In fact, over the past five quarters, BBRY has averaged a single-session post-earnings loss of 3.8%. For the company's fiscal first quarter, Wall Street is calling for a per-share loss of 25 cents -- a 12-cent decline over BlackBerry's year-ago results (after which, the stock shed 27.8% in the subsequent session).

On the charts, BlackBerry Ltd (NASDAQ:BBRY) has been a long-term laggard, down nearly 45% year-over-year to trade at $7.66. The stock has been making some strides in recent weeks, though, and is up almost 7% from its late-May lows of $7.16. With nearly 20% of the equity's float sold short, however, a portion of Friday's activity at the out-of-the-money June 8 call may have been the result of shorts hedging against any additional upside.


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