Research in Motion (RIMM, news, chart, volatility) calls were active Tuesday ahead of an earnings release later this week. Shares fell 87 cents to $96.97 and are down 26 percent over the past month. Attention now turns to an earnings report due out Thursday after the closing bell. Sentiment in the options market seems relatively upbeat heading into the news. Yesterday, for example, 70,000 calls and 35,000 puts traded on RIMM. The top two trades of the day included 9,700 of the January 110 calls traded for $10.10 and 9,700 of the January 140 calls for $3.05.
Both traded just before 1:00 Eastern time on the NYSE. Open interest increased by more than 10,000 in each of those contracts. Consequently, it appears to be opening trades. While the action might be straight call buying (both hit on the offer), this is possibly part of a bull call spread, where the strategist bought the 110s and sold the 140s. If so, they paid a net debit of $7.05 and have a potential payoff of $22.95 if RIMM rallies and moves back towards its June highs above $140 a share.
About the Author (Author Profile)
Frederic Ruffy is a well-known trader, writer, and strategist who has spent years educating investors and creating intelligent, insightful, unbiased market observations that are frequently cited by the Wall Street Journal and other financial publications. As senior analyst, Fred provides frequent and regular notes and daily updates for activity of interest.