Blackberry Earnings Trade Thoughts – Sweet or Sour

• Posted by Greg Harmon
• on March 27th, 2013

Who does not have a strong opinion about Blackberry, $BBRY. This stock was one that was loved to be hated and then just flat out loved. Which way now? The chart below suggests that the bounce off of the double bottom from September and October is now consolidating in a symmetrical triangle with the 20 day and 50 day Simple Moving Averages (SMA) hovering near the center line. The Relative Strength Index (RSI) is squarely in the middle of the zone with the Moving Average Convergence Divergence (MACD) indicator drifting lower towards zero. A neutral bias. Support lower comes at 12.58 and 12.10 followed by 10.65 and a Measured Move lower out of the triangle to 5.95. Resistance higher is found at 16.50 and 17.20 followed by 18.35 and then a Measured Move higher to the 22.60 to 23 range. There is ample fuel for a short squeeze as the short interest is near 30%. The reaction to the last 6 earnings reports has been a move of about 15.07% on average or $2.15 making for an expected range of 12.65 to 17.05. The at-the money weekly Straddles suggest a smaller $1.80 move by Expiry tomorrow with Implied Volatility at 280% above next week at 121% and April 12 at 103%. May implied volatility only drops off to 80%. This is heavily traded in options with the weekly 15 Call standing out with massive Open Interest as a possible magnet for Friday. A volatility play seems in order.

Blackberry, $BBRY

Trade Idea 1: Buy the March 13.5/16 Strangle for $0.77.
On the view that the options are under pricing a move for tomorrow.

Trade Idea 2: Sell the March 13.5/16 Strangle and buy the April 12 Expiry 13.5/16 Strangle for $0.73.
on the view that the options are fairly pricing a move and that it will continue, in what ever direction, next week.

Trade Idea 3: Sell the April 5 Expiry 12/18 Strangle and buy the May 12/18 Strangle for $1.00.
You will have 5 weekly opportunities to sell additional premium against the May options.

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Dragonfly Capital Views Performance Through March 2013 Expiry

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