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RIMM chart

 
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arthur
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PostPosted: Sat Sep 25, 2004 2:35 pm    Post subject: RIMM chart Reply with quote

RIMM reports earnings Thu. When RIMM reported earnings in late Jun, it bounced about 10 points. PLMO, which competes with RIMM, reported excellent quarterly earnings a week ago and it bounced over six points to 43 in afterhours. However, PLMO lowered guidance for next quarter and then fell over three points to 33 (it's currently just over 29). Also, I may add, RIMM may declare a 2:1 split.

Perhaps, a RIMM Oct net bearish option spread is best before earnings. However, the RIMM options are expensive. Perhaps, it's best to write two Oct 75 calls at 4.00 each and write two Oct 75 puts at 4.20 each, and buy one Oct 70 call at 7.00 and buy one Oct 80 put at 7.30, to partially hedge. The bet is RIMM will trade between 70 and 80 after earnings, and a net gain will be captured when the implied volatilities of the options deflate.

Another strategy may be to write the two calls and two puts on Mon (which will generate $1,640), and then wait for RIMM to rise or fall one or two points to buy a put or a call. If RIMM rises two points before earnings Thu, a put can be bought and if RIMM then falls one or two points, a call can be bought.

Also note, there is some risk involved on the option writing e.g. if RIMM rises above 85 or falls below 65. RIMM's Put/Call is currently 1.37, which is normally high or bullish for a stock. However, this ratio is average for RIMM. Also, RIMM's short interest ratio is 1.1, which is a low or bearish level. Only about 9 million of RIMM's 187 million shares outstanding are short shares, and it would take only just over a day of average shares traded to exhaust the existing supply of short shares.

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