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Research In Motion Ltd (NASDAQ:BBRY) Pessimists Pick Up Put Options

BBRY bears are buying June-dated puts

by 4/19/2013 3:12 PM
Stocks quoted in this article:

The shares of Research In Motion Ltd (NASDAQ:BBRY) are up 2.1% at $13.78, erasing an early deficit. In the options pits, meanwhile, traders are gambling on the BlackBerry maker to resume its recent downtrend, with speculators scooping up June-dated puts.

So far, the June 13 put has seen more than 10,400 contracts change hands on open interest of just 7,616 contracts, pointing to an influx of new initiations. Nearly two-thirds of the puts have crossed at the ask price, hinting at buyer-driven volume.

By purchasing the BBRY puts at a volume-weighted average price (VWAP) of $1.25, the buyers will make money if the stock breaches $11.75 (strike minus VWAP) -- in territory not explored since mid-January -- by options expiration on Friday, June 21. However, should the equity remain north of the strike, the most the buyers can lose is the initial premium paid for the puts.

From a sentiment perspective, today's preference for puts merely echoes the growing trend seen on the major options exchanges. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 0.78 registers in the 76th percentile of its annual range, implying that traders have bought to open Research In Motion Ltd puts over calls at a faster-than-usual pace during the past couple of weeks.

As a result, the security's Schaeffer's put/call open interest ratio (SOIR) sits at 0.85, higher than two-thirds of all other readings of the past year. Or, in simpler terms, near-term options speculators are more put-biased than usual right now.

As alluded to earlier, BBRY has suffered on the charts of late, giving up 18% since touching the $16.82 level late last month. Furthermore, the stock has underperformed the broader S&P 500 Index (SPX) by nearly 25 percentage points during the past 60 sessions. Against this backdrop, it's not too surprising to find options traders upping the bearish ante on Research In Motion Ltd (NASDAQ:BBRY).

Still, BBRY's technical troubles haven't been nearly as bad as rival smartphone maker Apple Inc. (NASDAQ:AAPL), which touched a new annual low of $385.10 after getting slapped with a price-target cut at Barclays.


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