Unusual Options Activity In Blackberry $BBRY
Unusual Options Activity In Blackberry $BBRY
As many of you know, unusual options activity can be a valuable indicator as to what traders are thinking, and more importantly, where these stocks are heading in the short-term.
This is something professional options traders pay a lot of attention to, and for good reason… Unusual options activity can “tip off” big moves in a stock, either up or down.
So let’s take a look at some ‘interesting’ activity that caught our eye this week…
Blackberry $BBRY is the once widely popular mobile communications company. It used to be that everyone in the business world had a Blackberry mobile phone. Now the company is just struggling to survive. Check here for more info on the business.
$BBRY is down 15% so far for the year. The current share price of $9.46 is 25% from the 52-week high of $12.63 and 35% above the 52-week low of $7.01.
So what does unusual options activity in $BBRY tell us?
$BBRY has been in a several year funk as it lost most of its market share to iPhone and Android products. The company has struggled to gain any traction with its new products. However, it’s attempting to find a niche market with ultra-secure devices.
So far, the new focus seems to be working. The company surprised everyone at the end of last week by posting a profit for the quarter. Analysts expected a $0.04 per share loss. Instead, the company saw profits of $0.04 on 1.6 million shipped smartphones.
Here’s the deal…
After the strong earnings news, a trader purchased over 12,500 June 9 puts. Over 10,000 of those were in a block for the price of $0.65. Remember, a put option is when the trader expects the stock to go down below the strike price by (June) expiration.
This trade makes money if $BBRY drops below $8.35 by June expiration. The cost of the trade is roughly $800,000, which is the max loss on the position.
The puts were bought for one of two reasons. It could be the trader doesn’t believe the company is really going to turn things around. So, he or she is using the uptick from the earnings release to get put options for cheap.
Or, the trader may be long $BBRY shares. In this case, the puts were bought as a hedge against downside risk. FYI, just because shares weren’t tied to the put trade doesn’t mean it’s not a hedge. The share purchase could simply have been executed at a different time/date.
Here’s the chart of Blackberry:
As you can see from the chart, $BBRY has been mostly trading sideways until a recent down move. However, the stock turned up after the earnings news. And, it could be headed for the 50-day moving average.
Personally, I don’t believe this is a downside speculative bet. The earnings report was surprisingly strong. And, the company expects to be profitable in 2016. That’s hardly a good reason to go short.
I believe the trade is more likely to be a hedge against long stock. $BBRY isn’t necessarily going to skyrocket anytime soon. However, the company could be a good long-term investment (hence long stock with a put hedge).
More Options Trading Ideas…
Keep in mind, there’s a lot more unusual options activity going on than what we discuss here.
We just try to bring you what we feel are the most significant ones– and the ones you might actually be able to make some money on!
Yours in Profit,
Gordon Lewis
Note: Gordon Lewis has been trading options for more than 15 years and he now writes and edits for Optionstradingresearch.com. You can sign up for the newsletter and get a free research report. We are your go-to source for top notch options trading research.
Category: Unusual Options Trading Activity
