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BlackBerry Ltd (BBRY) Options Strategist Bets On Extended Losses

BlackBerry Ltd is facing trendline resistance ahead of its next earnings report

by 6/16/2014 12:28 PM
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Option Brief: BlackBerry Ltd (NASDAQ:BBRY) is seeing an uptick in put activity today, amid the launch of its confidential instant messaging service BBM Protected. Specifically, 21,000 puts are on the tape so far, roughly seven times the average intraday volume. In a similar vein, the stock's 30-day at-the-money implied volatility is up 1.9%, signaling elevated demand for short-term contracts.

Digging deeper, the majority of today's BBRY options activity changed hands just after 10 a.m. ET, when a block of 6,700 June 9 puts traded below the bid price, while a 9,873-contract lot of September 9 puts traded at the ask price. Most likely, these transactions represent a roll out, as the bearish trader sold the in-the-money front-month puts to close, and applied the premium received toward the purchase of the later-dated puts. In other words, the speculator expressed confidence that BlackBerry shares will continue to move lower from now through September options expiration. If this is the case, the most he has on the line is the initial premium paid, should the stock finish above $9 when the September series of options stops trading.

On the charts this afternoon, BBRY is off 0.5% to trade at $7.85. In fact, since hitting a year-to-date high of $10.90 in late February, the shares have shed roughly 28%. What's more, the equity is facing overhead pressure from its descending 80-day moving average, which previously served as resistance during the second half of 2013. It's possible today's roll out strategist is banking on this trendline to again push the stock south.

Finally, on the fundamental front, BlackBerry Ltd (NASDAQ:BBRY) will report fiscal first-quarter earnings this Thursday morning. The mobile communications concern has struggled in the confessional recently -- missing analysts' estimates in two of the past five quarters, and averaging a five-day post-earnings loss of 5.3% over the same time frame.


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