Research In Motion Limited (NASDAQ:RIMM) designs, manufactures and markets wireless solutions for the worldwide mobile communications market. The company provides platforms and solutions for access to time-sensitive information, including e-mail, phone, short messaging service, organizers, Internet and intranet-based corporate data applications. RIM also licenses its technology to handset and software vendors to enable these companies to offer wireless data services based on its BlackBerry wireless platform and the RIM Wireless Handheld product line.
Research In Motion is an "old favorite" among option traders and the ongoing speculation about the company's future earnings potential keeps the premiums robust regardless of the overall market condition. The recent upside activity in RIMM shares can be attributed to a number of catalysts including the broad rally in technology issues, some optimistic comments by the CEO at a technology conference, and an upgrade by Goldman Sachs. Regardless of the reason for the bullish bias, the issue is currently more than 10% above the sold strike in this spread and traders who favor the outlook for the company's share value in the near-term should consider this position. Target a minimum credit of $0.40 initially, to allow for the daily volatility in the underlying issue.
Fundamentals Chart Earnings Dates Analyst Ratings
PLAY (conservative - bullish/credit spread):
BUY PUT JUN-65.00 RUP-RM OI=11672 ASK=$0.35
SELL PUT JUN-70.00 RUP-RN OI=10217 BID=$0.65
INITIAL "NET-CREDIT" TARGET = $0.40-$0.45
POTENTIAL PROFIT (X 5 contracts @ $0.40) = $200
MARGIN REQUIREMENT (X 5 contracts) = $2300
RETURN ON INVESTMENT (max) = 8.6%
COST BASIS = $69.60
INITIAL EXIT STRATEGY:
Once the position is open, traders should place a (contingent) order to close the short ($70.00) put options if the stock price moves below $71.75 on an intraday basis. A "net-debit" order of $0.95-$1.00 to exit the entire spread may also be appropriate for some portfolios. Future adjustments to this loss-limit/exit point will be posted in the MCM Newsletter.