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Option Brief: BlackBerry Ltd (NASDAQ:BBRY) option volume soared yesterday, with nearly 300,000 contracts crossing the tape -- more than twice the daily average. At the same time, calls held a sizeable advantage over puts, and one major reason why was a two-legged trade consisting of nearly 35,000 total contracts.
Specifically, just after 3 p.m. ET on the American Stock Exchange (AMEX), a block of 10,000 out-of-the-money January 2015 15-strike calls traded near the ask price at $1.17 apiece. Simultaneously, 25,000 January 2015 20-strike calls were exchanged below the bid price for $0.49 each. Open interest spiked at both strikes overnight, suggesting this option trader initiated a ratio call spread on BBRY -- a theory that Trade-Alert confirms.
In so doing, the speculator expressed confidence that BlackBerry -- currently down 2% today at $10.57 -- will advance beyond $15 by next January, when the long LEAPS expire. However, by simultaneously writing the higher-strike calls, the trader is banking on any potential rally stopping at or below $20. If BBRY shares topple that mark, then the big bettor will be exposed to theoretically unlimited losses, since only a portion of the sold calls are covered.
On the charts, BlackBerry Ltd (NASDAQ:BBRY) has had an incredible run so far in 2014, with the shares up 43%. Yesterday, in fact, the stock jumped 8.6%, after the mobile phone maker announced plans to divest the bulk of its Canadian real estate holdings in order to strengthen its balance sheet.