BlackBerry Limited (BBRY) Falters; Put Buying Ramps Up

BlackBerry Ltd (BBRY) has changed course since Friday

Digital Content Group
Mar 30, 2015 at 12:34 PM
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After adding 1.7% on Friday thanks to better-than-expected fourth-quarter profits, BlackBerry Ltd (NASDAQ:BBRY) is stumbling today, last seen 6.7% lower at $8.82. The dip comes after analysts at Credit Suisse and Deutsche Bank waxed pessimistic on the stock, and JP Morgan Securities lowered its price target to $9 from $10. Interest in puts has since picked up, with the contracts crossing the tape at three times the normal intraday pace.

Specifically, notable activity has been seen at the weekly 4/2 8.50-strike put, which it appears speculators are buying to open. These traders are betting on BBRY to fall below $8.50 by the close this Thursday, when the options cease trading. However, data from the International Securities Exchange (ISE) confirms some put writing at this strike, suggesting another group of short-term speculators is confident the shares will soon find a foothold. Delta on the contracts has jumped to 23% from 7.5% at Friday's close, but this still means the options have a less than 1-in-4 chance of being in the money at expiration.

Traders have been seemingly pessimistic on the equity for a while now. For instance, BBRY's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.44 is only 4 percentage points from an annual high. In other words, puts have been bought to open over calls at an accelerated clip in recent months.

Even with today's struggles, BlackBerry Ltd (NASDAQ:BBRY) has been a long-term outperformer on the charts. Year-over-year, the shares have added 9.2%. Should this uptrend resume, a capitulation of option bears could result in tailwinds.

Daily chart of BBRY since March 2014
 

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