Bullish Options Traders Take Aim at BlackBerry Ltd (BBRY)

Bullish options traders have been targeting BlackBerry Ltd (NASDAQ:BBRY) in recent weeks

May 23, 2016 at 3:41 PM
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Bullish options traders have been targeting BlackBerry Ltd (NASDAQ:BBRY) calls in recent weeks. Over the past 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), more than eight BBRY call options have been bought to open for every put, with the resulting call/put volume ratio of 8.08 topping 84% of readings from the past year. Call open interest on BBRY now stands at an annual high, and this bullish bias toward the stock's options is only accelerating today. 

At last check, BBRY call options were outnumbering puts 5,194 to 659, putting the single-day call/put volume ratio in the 94th annual percentile. Speculators are taking aim at BBRY's weekly 5/27 7-strike call, where volume is more than double the next closest option. It looks like traders are initiating long positions here, betting on the stock to reclaim the $7 level by Friday's close, when the weekly series expires. BBRY topped out earlier at $6.98. 

When noting accelerated volume in BBRY call options, though, one has to mention the stock's elevated short-interest levels. At the stock's average daily trading volumes, it would take short sellers roughly three weeks to cover their positions -- meaning there's a chance these bears are using call options to hedge their positions.

Skepticism for BBRY is also evident among the brokerage bunch. In fact, 88% of covering analysts rate the shares a "hold" or "sell." 

This unflattering outlook comes after BlackBerry Ltd (NASDAQ:BBRY) has lost more than one-fourth of its value year-to-date. Moreover, BBRY's 1.8% rally today has stalled out right at $6.93 -- the site of its 30-day moving average. If this technical setup doesn't scare you, though, it's actually a great time to buy BBRY's near-term options, from a pricing standpoint. Specifically, the stock's Schaeffer's Volatility Index (SVI) of 32% marks a 12-month low, meaning the options market is pricing in historically low volatility expectations. 

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