Research In Motion Options (RIMM): Unusual Trading Activity

| May 29, 2012 | 0 Comments

BlackberryOptions in Research In Motion (RIMM) are trading large volume this morning.

Even though the broad market is in the green today, we’re surprised that our tracking system is showing unusual call buying in what has become a very unpopular name.

Earnings season is winding down.  Europe is still dealing with their issues.  And domestic data this morning was mediocre at best.

In turn, we now must switch our focus to news driven events when it comes to option trading.

In early trading, RIMM is up 3% at $11.35 a share.  The largest volume this morning is concentrated on two different call strikes.

The first is the RIMM June (weekly) $12 strike call options.  This strike has, in the first few minutes today, traded over 2,800 contracts at an average price of $0.11.

The second most heavily traded RIMM option is the regular June expiration $12 strike calls.  These have already traded over 2,600 contracts at a price of $0.41.

Don’t forget, straight out call buying is a strategy used when option traders believe a stock is headed substantially higher in the short-term.

So, the question is, why so many call options on this troubled name?

As most of you know, Research In Motion designs and markets wireless handsets, software, and services.

RIMM’s primary revenue driver is the sale of handsets to carriers worldwide that promote the company’s BlackBerry line of devices.  In addition, the company generates access service fees from carriers for each BlackBerry subscriber.

Here’s the thing…

After getting beaten down heavily over its last earnings report, RIMM’s now putting in a short term bottom.  And if we see any type of short covering rally over the next few weeks, RIMM will likely trade in lockstep with the overall market.

What’s more, the company plans to announce 2,000 layoffs beginning as early as June 1st.  RIMM currently carries 16,000 employees, so this represents an elimination of 12.5% of their total workforce.

And when a company announces layoffs, the cost savings go directly to the bottom line.  As a result, this usually gives the stock a short-term bounce.

I think this is exactly what options traders are betting on here.

Let’s wait a few days and see how this plays out!

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Category: Unusual Options Trading Activity

About the Author ()

Marcus Haber is the co-editor of Options Trading Research and boasts well over a decade of real-life options experience. Learning from some of the biggest names in the business, Marcus has served as an Options Strategist for a number of firms and was also appointed to the Options Advsiory Board with Pershing, a branch of the Bank of New York.