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Bulls Make a Beeline for BlackBerry Ltd (BBRY) Options

BlackBerry Ltd bulls circled 8-strike calls on Thursday

by 5/30/2014 9:45 AM
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Option Brief: BlackBerry Ltd (NASDAQ:BBRY) bolted 6.2% higher to $7.74 on Thursday, and was last seen at $7.77, positioning the stock to notch its first weekly win atop its 10-week moving average since early March. Bolstering the equity was relatively new CEO John Chen, who offered optimistic comments about the company's turnaround chances during a recent Code Conference speech. Meanwhile, options traders waxed optimistic on BBRY's technical prospects, picking up calls at a faster-than-usual clip.

By the close, BBRY saw roughly 81,000 calls cross the tape -- more than four times the norm -- compared to just 21,000 puts. Short-term options were especially in demand, as the security's 30-day at-the-money implied volatility (IV) jumped 5.8% to 54.1%.

Garnering notable attention were the weekly 5/30 8-strike and June 8 calls, which saw about 7,300 and 17,800 contracts exchanged, respectively. The majority of the calls crossed on the ask side, IV shot higher, and the duo of calls saw the biggest overnight open interest changes among all strikes, hinting at newly bought bullish bets.

The weekly calls were purchased at a volume-weighted average price (VWAP) of $0.04, meaning the buyers will profit if BBRY closes today -- when the options expire -- north of $8.04 (strike plus VWAP). Beyond that breakeven, profit potential is theoretically unlimited, while risk is capped at the initial premium paid for the contracts, should BBRY remain south of the strike today. In light of the stock's rally yesterday, delta on the call skyrocketed to 0.21 from 0.035, implying about a 21% chance of expiring in the money.

Meanwhile, BlackBerry Ltd's (NASDAQ:BBRY) June 8 calls were bought at a VWAP of $0.31, making breakeven at expiration $8.31. Again, reward is theoretically unlimited beyond that level, while the maximum risk stands at the initial net debit. Due to the added time value (relative to the aforementioned weekly calls), delta on the front-month contracts stands at 0.44. In other words, the odds of an in-the-money expiration at the close on Friday, June 20, are about 44%.

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