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Option Traders Swarm Research In Motion Limited (USA)

RIMM (soon-to-be BBRY) traders are flocking to weekly options

by 1/30/2013 12:26 PM
Stocks quoted in this article:

Option speculators are scrambling to bet on Research In Motion Limited (USA) (NASDAQ:RIMM - 14.49), with intraday volume skyrocketing to roughly three times the norm. Amid the company's BlackBerry 10 debut, RIMM has seen roughly 197,000 calls and 148,000 puts change hands, compared to its average midday volume of around 59,000 calls and 38,000 puts.

Weekly options have garnered the most attention from both bulls and bears, with roughly 9,200 calls and 8,200 puts traded at the weekly 2/1 16 strike. The majority of the options have crossed at the ask price, and volume has surpassed open interest on both sides of the tape, pointing to buy-to-open action.

By purchasing the 16-strike calls at a volume-weighted average price (VWAP) of $0.49, the buyers expect RIMM to finish the week north of $16.49 (strike plus VWAP). Meanwhile, the VWAP of the 16-strike puts is $1.07, indicating a breakeven level of $14.93 (strike minus VWAP) for the buyers. However, even if RIMM settles right at the $16 strike when Friday's close rolls around, the most the buyers can lose is the initial premium paid for the options.

Prior to today's highly anticipated smartphone launch, options players were growing cautious. In yesterday's session, option bears bought to open the weekly 2/1 15-strike put, which saw open interest climb by almost 5,300 contracts overnight. Elsewhere, longer-term traders targeted the February 13 and April 15 puts, which saw overnight open interest spikes of about 15,000 and 5,500 contracts, respectively.

What's more, the security's Schaeffer's Volatility Index (SVI) soared to an annual peak of 110%, implying demand for front-month options is extremely high right now, translating into lofty option premiums. Per Schaeffer's Senior VP of Research Todd Salamone, implied volatility readings are "coming in" today, but remain "way above baseline" levels.

At last check, RIMM has hiccupped 7.8% to test support at its 20-day moving average. Just below that is the equity's 10-week trendline, which hasn't been breached on a weekly closing basis since late September. What's more, the stock's year-to-date gain still sits around 22%.

The company today said it's changing its name to BlackBerry, and will adopt the ticker of "BBRY" on Monday.


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