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Research In Motion Ltd (NASDAQ:BBRY) options traders are using relatively unconventional methods to roll the dice on long-term support for the stock. More specifically, investors today are selling to open deep out-of-the-money put options, in the hopes that BBRY will remain north of the strike through the next several months.
So far today, BBRY has seen around 51,000 puts cross the tape, representing a 17% mark-up to its average intraday volume. A good chunk of the action transpired at the January 2014 11-strike put, where 16,600 contracts have traded at a volume-weighted average price (VWAP) of $1.21. More than two-thirds of the puts changed hands on the bid side, and volume is exceeding open interest at the LEAPS strike, underscoring our suspicions of sell-to-open volume.
In order to retain the entire premium received at initiation -- which represents the maximum profit on the play -- the sellers need Research In Motion Ltd (NASDAQ:BBRY) to stay atop $11 through January 2014 options expiration. With BBRY currently sitting at $14.76, the sellers have a 25.5% cushion between the stock and the strike.
From a broader sentiment standpoint, BBRY appears under-loved on Wall Street. The stock has outperformed the S&P 500 Index (SPX) during the past month, yet boasts just six "buy" or better ratings from analysts, compared to 11 "holds" and 13 "sell" or worse recommendations. Likewise, short interest accounts for more than one-third of BBRY's total available float, representing more than six sessions' worth of pent-up buying demand, at the stock's average pace of trading.
Technically speaking, the shares have more than doubled since touching a low of $6.22 in September, ushered higher atop their 10-week and 20-week moving averages. Should the security resume its long-term ascent, a round of upgrades or a short-squeeze situation could stoke the bullish flames.