Research In Motion (NASDAQ:RIMM) designs, manufactures and markets wireless products for the mobile communications market worldwide. It provides platforms and services for access to information, including email, voice, instant messaging, short message service, Internet and intranet-based browsing, and multimedia content through integrated hardware, software and services. RIM’s BlackBerry smartphones use wireless, push-based technology that delivers data to mobile users’ business and consumer applications. The company sells its BlackBerry lines through global wireless communications carriers and third-party distribution channels.
The trials and tribulations of RIM continue with the stock closing below $9 on Tuesday, and making new low at $8.83. With earnings due this Thursday, implied volatilities in the June weekly options are off the charts, pushing 130. Back-month implied volatility remains more muted, with August trading in the mid-70s.
RIMM has nearly $3.40 per share in cash, and earnings are expected to be flat. Rumors of potential takeouts by Amazon (NASDAQ:AMZN), Facebook (NASDAQ:FB) or others are always swirling, as is the potential for a company breakup.
Tuesday’s price action is encouraging, with the stock looking like it will put in a key reversal day. Given that RIMM is being valued at less than $5 per share ex-cash as an ongoing concern, I think anything but a earnings debacle will be met with a relief rally.
Probabilities favor a move to the upside at these levels, and with implied volatility of the weekly options so high, strategies that employ selling these options in a spread format should be favored.
I look for RIMM to move higher post-earnings on Thursday, with a close of $11 at August expiration.
Based on RIMM’s closing market price of $8.97 on June 26 and using a target price of $11 and a target date of Aug. 17, option strategies to consider include selling an August put spread, buying an August iron condor, buying an September call condor, or using another options strategy that best fits your trading style and risk-return objectives.
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As of this writing, Tim Biggam currently does not hold any positions in RIMM.