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It's been quite a month for BlackBerry Ltd (NASDAQ:BBRY), with the shares up 12% to trade at $11.47. Against this backdrop, traders at the International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE) have bought to open 58,128 calls versus 18,168 puts on BBRY during the past five sessions, resulting in a top-heavy call/put volume ratio of 3.20.
In today's session, the shares have surged 4.2% on no apparent news, and in the stock's options pits, calls are outpacing puts by a roughly 3-to-1 margin. Although BBRY has not seen the north side of $15 since June 2013, a number of traders appear to be buying to open the stock's September 15 call to either bet on -- or hedge against -- a move to this level over the next two months.
The calls are being scooped up for a volume-weighted average price (VWAP) of $0.23. Based on this average entry price, at-expiration breakeven at the close on Friday, Sept. 19, is $15.23 (strike plus VWAP), with gains theoretically unlimited with each additional notch above here BBRY makes. Conversely, risk is capped at the premium paid, should the equity finish south of $15 at expiration.
Given the deep out-of-the-money status of these calls -- the strike represents upside of 31% to current trading levels -- a portion of today's activity could be at the hands of short sellers hedging against a steeper rise. At present, more than 20% of the stock's float is sold short. Should BBRY continue to make its way up the charts, though, a capitulation by these bearish bettors could help fuel the security's fire. In fact, it would take 11 sessions to cover these shorted shares, at BlackBerry Ltd's (NASDAQ:BBRY) average daily pace of trading.