Stocks quoted in this article:
BlackBerry Ltd (NASDAQ:BBRY) is trending 5.5% higher at $10.58 this afternoon, following news of a potential spinoff of its BBM messaging service into a separate company. Furthermore, speculation continues over whether BBRY plans to sell parts of its business to potential suitors, as opposed to the entire operation. With this in mind, today's options traders are picking up BBRY calls at a rate of more than two times the intraday norm. Specifically, 87,000 calls have been exchanged, compared to just 21,000 puts. Against this backdrop of conjecture and growing options demand, BBRY's 30-day, at-the-money implied volatility has surged 11.8 percentage points to 85.2% (the highest reading since late March).
BBRY's short-term calls have seen the most activity today, with the September 13 strike at the top of the list. Here, more than 16,000 contracts have crossed for a volume-weighted average price (VWAP) of $0.16. Roughly three-fourths of these contracts went off at the ask price, indicating they were purchased. Additionally, implied volatility has ticked 10.7 percentage points higher, which -- along with data from the International Securities Exchange (ISE) -- suggests that most of the contracts were bought to open.
By purchasing these out-of-the-money options, today's call buyers anticipate BBRY will climb north over the next few weeks, into territory last reached at the end of June. Specifically, they expect the stock to topple the breakeven price of $13.16 (strike price plus the VWAP) by the close on Sept. 20, when front-month options expire. Delta at this strike currently sits at 0.19, or 19%, meaning the option has a nearly 1-in-5 chance of finishing in the money by expiration. Should BBRY fail to make the expected trek, the most the call buyers stand to lose is the initial premium paid.
Technically speaking, BlackBerry Ltd (NASDAQ:BBRY) has had a bumpy 12 months. Although BBRY stands 49.7% higher on a year-over-year basis, the stock has suffered a 26.8% drop in the past three months. As of late, however, BBRY has made a turnaround, gaining more than 18% in the past four weeks alone. Of note, short interest
grew by 4.8% during the last reporting period, and now accounts for a whopping 31.5% of the stock's available float. Therefore, it's possible that some of BBRY's heavy call activity of late is due to short sellers hedging their bearish bets.