As most of you know RIMM will be announcing earnings after the close today.
The consensus is mixed from buy, hold, sell, strong sell.
Normally, I rarely suggest the sale of spreads with earnings being reported during the option cycle.
In this case, RIMM, was an exception, since it was the day before expiration.
Just a thought for some of you who may be concerned about the potential for blow-out earnings by RIMM,
as of this email we are currently 5 points out of the money and it would take a 20% move in the stock tomorrow
morning( depending on where we close today) to threaten our 35 short call strike price ( I have seen stranger things happen ),
however I feel stronger that this even will not materialize.
However, if one is a little concerned about that blow out event happening tomorrow, you can always
close out the spread before the close today for roughly a NET DEBIT of $0.18 , ( as of this email )
Alternatively, you could buy the 32.5 call ( cost roughly $0.78 and if you get a run up the 32.5 call protects the position of your short 35 call
and gives you an opportunity to make money if RIMM should surprise everyone to the up side 20% and close above 35 tomorrow
Your 35 short call would be covered by your $32.50 long call and potentially make $2.50 per contract if
RIMM ballon to $35 or more tomorrow. However, if the stock drops you will have lost the premium you paid
for the $32.50 call and make a net loss for the RIMM trade in general.
This is one reason why I don't recommend this as the optimum choice, however, this play choice would be your call.
we are, conversely, going to HOLD our current position and take our chances with RIMM on Friday and cover if we
Remember RIMM will need at least a 20% run up and close tomorrow to threaten our short 35 call position.
I believe that is pushing the probability expectation level a bit much, hence we are HOLDING the current spread through
this evening and tomorrow
I just thought it would be a good idea to give you the heads up regarding RIMM and its earnings in case you
want to exit.
If you do decide to close the spread today, at the current prices, you would be closing the RIMM spread at a NET profit for
the RIMM trade.