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Short-Term Bulls Target BlackBerry Ltd (BBRY)

BlackBerry Ltd's April 9 calls are flying off the shelves

by 3/19/2014 12:16 PM
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Option Brief: At midday, BlackBerry Ltd (NASDAQ:BBRY) call volume is outpacing its intraday average by a two-fold margin and put volume roughly eight times over. More than one-third of the calls have traded at the April 9 strike, where 15,459 contracts are on the tape -- thanks largely to a multi-exchange sweep of 10,000.

Over 90% of the in-the-money calls changed hands at the ask price, suggesting they were bought. Also, implied volatility is on the rise, and volume more than doubles open interest at the strike, making it safe to assume some of these are newly bought bullish bets on BBRY -- a theory that Trade-Alert supports.

By scooping up the calls, the traders expect BlackBerry -- currently 1.4% higher today at $9.33 -- to continue muscling its way north of the $9 level, which recently emerged as a layer of technical support. Specifically, because speculators paid a volume-weighted average price (VWAP) of $0.98 for the contracts, they're looking for the stock to surpass $9.98 (strike price plus VWAP) within the option's lifetime. However, if the shares slide south of the strike price and the contracts finish out of the money on April options expiration (roughly a month from today), the traders will forfeit 100% of the initial premium paid.

On the fundamental front, BlackBerry Ltd (NASDAQ:BBRY) is scheduled to report fiscal fourth-quarter earnings before the open next Friday, March 28. The smartphone maker has a mixed history in the confessional, exceeding analysts' bottom-line estimates in just four of the past eight quarters. However, last time around, the shares gained 16.8% in the week following the firm's report. Elsewhere, BBRY announced this morning it has begun selling its Z30 handheld on ShopBlackBerry.com.


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