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Option Brief: BlackBerry Ltd (NASDAQ:BBRY) is soaring as we approach midday, with the shares tacking on over 12% to trade at $9.33, thanks to this morning's fiscal first-quarter earnings beat. As such, option volume is running at breakneck pace -- especially on the call side, where 86,000 contracts are on the tape, compared to an expected intraday volume of 10,000. However, the stock's 30-day at-the-money implied volatility has plummeted 22.9% to 46.7%, following the usual pre-earnings run-up.
BBRY's most active strike is the June 9 call, which appears to be experiencing sell-to-close activity, after this morning's bull gap brought the contracts safely into the money. Meanwhile, other traders are looking for a continued rally through tomorrow's closing bell, by scooping up June 9.50 calls. Nearly 8,300 contracts have been exchanged here. With the majority trading at the ask price, and volume outstripping open interest, it's safe to assume some of the calls were bought to open.
The speculators picked up these out-of-the-money calls at a volume-weighted average price (VWAP) of $0.14. Therefore, breakeven at tomorrow night's close -- when the front-month contracts expire -- is $9.64 (strike plus VWAP). Additional gains are theoretically unlimited north of here, while losses are limited to the initial premium paid, should the BlackBerry Ltd (NASDAQ:BBRY) calls finish out of the money at expiration.