Tuesday, November 17, 2009

RIMM - Bear Call


I made another contrarian trade today. Most people expect RIMM to go up. There are rumors of MSFT buyout and the company is buying back $1.2 billion dollars of their shares.

I am not optimistic shorter term on RIMM primarily from the technicals.I am not bearish longer term. Thus, I am willing to collar the stock if my SC goes ITM.

RIMM is having a Head and shoulder with the neckline at 60-65. If it breaks 60, it could go down to <50. So far,the actions in the last few days were not positive.

So I decided to go for a Bear Call

o BT0 65/70 Bear Call for a credit of 1.35.

PE: Let the short call expires and keep the credit by December
SE: The BE for the sale is 65+1.35 = 66.35. So if stock goes ITM at 65, I will either close the trade or buy the stock at around 66.35. I will be putting a stop limit order to buy the stock at 66.35.

If the order is triggered, the trade will be turned into a collar. Let the SC expires, roll the Long call 70 to Jan and buy a put in Jan or Feb stike 65. By that time, it is probably confirmed that RIMM has turned bullish if it breaks 65.
Posted by at

2 comments:

  1. InnovestorDecember 8, 2009 at 11:07 AM

    I got out of the trade for a profit of credit of 1.07 today.

    ROI = (1.35-1.07)/1.35 = 20.7%

    RIMM has turned short term positive. It will probably rally to earnings period on Dec 17th.

    I bought a bull put 55/50 for credit of 0.64 today.

    ReplyDelete
  2. InnovestorDecember 13, 2009 at 10:35 AM

    The exit on December 8th proved to be a good decision. RIMM went up the next few days on news of partnership with China Mobile.

    Nevertheless, the resistance at 66 proves to be formidable.

    With the results coming this Thurs and expiration on Friday, it will be a great idea to do a strangle. Premium, however is pretty high. So I will need to decide the volatility can trump the premium during this week. It is a tough decision.

    But it is quite clear even from the option pricing now, that RIMM will either moves above 66 or go below 60 by next monday.

    ReplyDelete

Subscribe to: Post Comments (Atom)

Visitors to this blog

Locations of visitors to this page

About Me

An engineer by training graduated with B.Sc (hons) and MBA from Strathclyde university in Glasgow, Scotland. Started as an engineer in R&D for 3 years with Philips. Then, worked with DuPont for 13 years. Last job was VP, Marketing for Asia Pacific. Left to start a number of companies in various segments which include a large electronic distribution, a VoIP provider, an internet trading portal in Australia,and an executive training consultancy firm. Have listed companies in NYSE, Australia Stock Exchange, Singapore Stock Exchange Main Board. I was on the Board of Directors for 1 company listed in Thailand, 1 in Singapore and 1 in Australia. Was in the senior management of a company listed in NYSE. Still holding major share positions in the VoIP and Executive training companies. Both are private companies.

Disclaimer

These articles merely reflect the opinions of this author and are by no means a guarantee of future economic conditions, market or stock performance. Though the author strives to provide accurate and relevant data, he sometimes relies on external sources and cannot assure the reader of the accuracy of these external sources. Additionally, these articles are provided for INFORMATIONAL PURPOSES ONLY and are NOT MEANT to provide investment advice to anyone. For investment advice, please consult your professional adviser.