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The shares of Research In Motion Limited (USA) (NASDAQ:RIMM - 11.99) enjoyed a bullish gap on Friday, ending in territory not charted since mid-May. What's more, it looks like some options traders are gambling on even more short-term upside for the BlackBerry maker, as evidenced by the surge in call buying.
By the time the dust settled, RIMM had seen roughly 195,000 calls change hands -- about four times its average daily call volume, and more than double the number of RIMM puts exchanged. Garnering notable attention were the weekly 12-strike calls, which expire at the close on Friday, Nov. 30, and January 12 calls. Open interest increased at both strikes over the weekend, and the majority of the calls crossed at the ask price, pointing to buy-to-open activity.
By purchasing the calls to open, the buyers are expecting RIMM to surmount the $12 level within the options' respective lifetimes. Specifically, the volume-weighted average price (VWAP) of the weekly calls was $0.32, meaning the buyers will profit if RIMM topples the $12.32 level (strike plus average premium paid) by the end of this week. Meanwhile, the VWAP of the back-month calls was $1.16, indicating a breakeven level of $13.16 for the buyers.
As alluded to earlier, the shares of RIMM soared more than 13% on Friday, thanks to optimism ahead of its BlackBerry 10 debut. In fact, the equity ended in double-digit territory for the second day in a row -- a feat not accomplished in about five months. Furthermore, the stock finished a second straight session north of its 200-day moving average for the first time since March 2011. However, as a result, the security's Relative Strength Index (RSI) now stands at 81 -- in overbought territory, suggesting a pullback could be in the cards.
Nevertheless, there could be some contrarian gas in the tank. The stock currently sports just three "buy" or better ratings from analysts, compared to 19 "holds" and 11 "sell" or worse suggestions. Furthermore, nearly 20% of the equity's float is sold short, representing more than seven sessions' worth of pent-up buying demand, at RIMM's average pace of trading. Should the stock extend its upward momentum, additional upgrades -- RIMM already scored an upgrade to "sector outperformer - speculative" from "sector underperformer" at CIBC this morning -- or a short-squeeze situation could lure even more buyers to the bandwagon.
At last check, RIMM has continued its ascent, tacking on 2.9% to hover just shy of the $12 level.