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Last-Minute Bulls Take Aim at BlackBerry Ltd (BBRY)

BlackBerry Ltd's soon-to-expire May 7.50 call was most popular on Thursday

by 5/16/2014 10:42 AM
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Option Brief: BlackBerry Ltd (NASDAQ:BBRY) bucked the broad-market trend lower on Thursday, after the firm said it's attempting to become "cash-flow positive by the end of fiscal 2015," and that it's "firmly on a turnaround path." Against this backdrop, BBRY calls outnumbered puts by a greater than 2-to-1 margin yesterday, with speculators picking up short-term calls to gamble on more upside for the stock today.

The stock's 30-day at-the-money implied volatility (IV) jumped 2.4% to 42.1%, pointing to escalating demand for short-term contracts. In fact, a healthy portion of yesterday's call activity transpired at the soon-to-expire May 7.50 strike, where close to 9,300 contracts changed hands. The majority of the calls traded on the ask side, and open interest increased the most of any strike overnight, pointing to buy-to-open activity.

The call buyers will be profitable if BBRY is sitting atop $7.55 (strike plus volume-weighted average price of $0.05) at today's close, when front-month options expire. If the stock ends beneath the strike, the most the buyers will lose is the initial premium paid. However, now is an opportune time to gamble with BBRY options; the stock's Schaeffer's Volatility Scorecard (SVS) sits at a lofty 99, implying that the shares have tended to make outsized moves on the charts, relative to what the options market has priced in.

Speaking of BBRY's technical performance, the security has outperformed the S&P 500 Index (SPX) during the past month. What's more, Point72 Asset Management -- formerly SAC Capital -- is rolling the dice on a successful turnaround for BlackBerry Ltd (NASDAQ:BBRY), and scooped up a sizable new stake in the first quarter (though Third Point LLC dissolved its stake). The shares are down 1.9% at $7.24 in early trading, as investors digest the stepping down of board member Bert Nordberg.


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