Bargain Hunters Should Take a Look at BlackBerry Ltd (BBRY) Options

BlackBerry Ltd (BBRY) traders are buying calls and selling puts

Jan 25, 2017 at 10:39 AM
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Anyone looking for a cheap stock with cheap options may have a match in BlackBerry Ltd (NASDAQ:BBRY). The mobile device maker's 30-day at-the-money implied volatility of 30.1% -- which ranks in the low 5th percentile of its annual range -- is only 12.1 percentage points above its historical volatility. In other words, it's an opportune time to purchase short-term BBRY options.

Among buyers, there's been a strong preference toward calls over puts. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have purchased 16.27 calls for every put in the last two weeks. The corresponding call/put volume ratio ranks only 13 percentage points from a 52-week high.

Echoing this bias toward calls is BBRY's Schaeffer's put/call open interest ratio (SOIR). At just 0.14, the stock's current SOIR is the lowest reading of its kind in the past 12 months. In other words, short-term traders are extremely call-skewed at the moment, hinting at bullish expectations for the shares. However, with 9.4% of the stock's float sold short -- which would take a week to cover, at average trading levels -- it's possible call buyers are, in fact, short sellers hedging their bearish positions.

Interestingly, it seems BlackBerry put traders have been expressing confidence, too. During the past two weeks at the major exchanges, speculators have sold to open 6,115 puts while buying to open just 702 -- resulting in a top-heavy sell-to-open ratio of 8.71. With volatility expectations so modest at the moment, though, it's a far better time to purchase premium than to sell it.

Technically speaking, BlackBerry Ltd (NASDAQ:BBRY) has mostly been spinning its wheels since August. Breakout attempts have repeatedly stalled in the $8-$8.40 range, while pullbacks have generally been contained by the $7 level. Perhaps this explains the put selling -- as traders may be more confident in a churn than an outright rally. At last check, the stock was 1.1% higher at $7.29.

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