Mark Sebastian is the creator of the Option Pit blog.

Research in Motion Ltd. (NASDAQ: RIMM) is typically a popular equity to track for students of option trading. The stock has high volatility and has long been relatively pricey.  Yet, out of all the earnings plays RIMM may have cost my options mentoring students the most.  The company has no pattern.  The implied volatility (IV) gets bid up and the earnings thud, the IV gets bid up and the company flies, the IV doesn’t get bid up and the company flies, the IV gets … you option traders get the point.  To further the evidence here is a look from LiveVolPro of the last four earnings cycles:

Some cycles were big movers other duds, I challenge any trader to find a pattern.

For what it’s worth, the world is not expecting very much to happen into earnings right now.  With the stock trading near $61 the front month straddle is super cheap at about under $4.50, less than 7.5%.  A move the company has had on several occasions.  The 60/62.5 strangle also seems dirt cheap at 3.30 and change.  Since its last earnings, this company has been on a serious rally.  In the mean time the implied volatility has been a bit choppy.  The interesting thing to me is that right now it seems the IV is actually dropping ahead of earnings.  With RIMM’s history, this is really strange:

Its also interesting is too compare what October from last cycle to January this cycle.  The volatility difference is astounding at over 10 points difference in implied volatility.

Here is October:

Notice even the 60s, which are 15 points out of the money are trading at close to 55% IV.  Now look at January:

Now the January is NOT the front month, that matters, but for the 60’s which are now At-The Money to be trading more than 10 points lower than the last cycle means the market is expecting absolutely nothing, it could be because of the rally, and it could be the VIX itself.  I personally am not buying it.  I expect a couple of things

1.  The IV is going to get bid up at some point.  Making a 3.30 purchase of the 60/62.5 strangle a winner before earnings.

2.  Sometime on the 15th, paper will start dictating the direction the stock is going to be heading.  If I had to guess, they will be buying puts, but that is pure speculation, I need to follow the paper before I can get even a clue as to what direction RIMM is heading.

If I had a gun to my head I would think that the best purchase on the board ahead of earnings is the RIMM January 60 Straddle, at under $7, this seems to be the cheapest purchase on the board.  With the price December is trading at, I have no interest in calendars or diagonals on this stock.  Check my Option Pit blog Wednesday with some sort of plan of attack (or lack there off).  My guess is I will end up owning either strangle, straddle, or and off center strangle.

Follow Mark Sebastian on Twitter @optionpit.