Trade Update March 15, 2012 at 10:15am: Since initiating this calendar spread about a month ago BBRY has been all over the place, as low as 12.50, and as high as 16 just yesterday morning. Now with the stock just a tad away from where I bought the spread and less than 2 weeks away from their fiscal Q4 report, I am going to close for a gain. As I have said repeatedly of late, I think the stock is probably a buy bwtn $10 and $12 and I am inclined to be short in the high teens. But here, with lots of potential news on the Z10 front, and the much anticipated U.S. launch late in the spring, and the fact that the stock has about one third of its float short, it appears to be in no mans land. The calendar has appreciated and the break-evens no longer look that attractive. I am going to take my gains and look for other ways to play.
Action: BBRY ($14.83) Sold to Close March 22nd / April 14 Put Spread at .94 for a .30 gain.
Original Post Feb 14, 2013: New Trade $BBRY – The Company Formerly Known as RIMM
Research in Motion, ahem, I mean Blackberry, has been a trader’s paradise over the past 5 months. The stock resurrected from the dead, moving from around $6.50 in September all the way to above $18 in January. The company even attracted enough attention to make headlines on the Blackberry Z10 launch party, reminding us of a time when consumers actually cared about RIMM’s, I mean BBRY’s, next product release.
Now, the stock is basically trading on whether the Z10 will be a success or a dud. The company has placed its bets, and the market’s active trading shows zealots on both sides of the bull/bear debate. Even illustrious tech reviewers like Walt Mossberg of the WSJ don’t have a clear-cut verdict. Here was Walt’s conclusion in his review:
The Z10 and BB10 represent a radical reinvention of the BlackBerry. The hardware is decent and the user interface is logical and generally easy to use. I believe it has a chance of getting RIM back into the game, if the company can attract a lot more apps.
Ah, the apps. That’s the big missing piece to an otherwise nice bit of hardware. It’s where the crux of the debate is going to line up over the next few months. Dan Niles agreed with me on Fast Money on CNBC last week that working on the Z10 was a losing proposition for app developers, and the company was facing a serious uphill battle.
My chart friend, Mr. Taner, also does not like what he sees. His chart and comments:
[caption id="attachment_22727" align="alignnone" width="623"] 1 year chart of BBRY, Courtesy of Bloomberg[/caption]
BBRY had a strong momentum run from November to January, but each impulsive push was on less momentum, as shown by the RSI. At this point, the up move seems somewhat exhausted, and I expect the stock to respect its range between 12 and 16 for the time being.
So Enis is expecting a rangebound trade in the short-term. I think the backbreaker for the Z10 optimism is likely going to come on Blackberry’s next earnings report, currently scheduled for late March.
What caught our eye was the small vol differential between March (which does not capture earnings) and April (captures earnings) options. Given the importance of this next earnings report as a signal for the potential success of the Z10, the options market does not seem to be adequately pricing the volatility there.
TRADE: Bought the BBRY ($15.02) Mar22nd / Apr 14 Put Calendar for $0.64
-Sold 1 Mar21st 14 put at $1.12
-Bought 1 Apr 14 put for $1.76
This trade is a cheap way for me to get long the earnings move more than a month away from the event. The hope is that BBRY does not stray too far from the $14 between now and March 21st expiry, and then I will be long the Apr 14 put in BBRY for a low cost ahead of the pivotal earnings event.