Wednesday, October 3, 2012

Aqumin Volatility Newsletter 10/03/2012 - $RIMM

Is RIMM the new IBM?

Way back in the early 1990’s when MSFT was beginning its climb to dominance IBM was on its way to 0. It is hard to believe but at the time the mainframe business of IBM was going away due to the fantastic growth of the PC and mini computers. As a trader looking at the IBM pit I could see the every call strike going out worthless as the pit was selling every call that could find a bid. I think split adjusted the IBM hit $10 bucks or so (now trading north of $200). This is not an article about IBM but really one of a turnaround possibility. Companies, even ones where the prospects look bleak, can turn it around.

Imagine my surprise yesterday when my AlphaVision™ for Bloomberg ticker landscape (in real time) showed RIMM of all names strongly up in an otherwise very weak market, and super weak for the big techs. If you note the layout of my screen, I follow all listed names that trade options for equities and ETF’s in this landscape. This is a screen I euphemistically call my “looking for stuff” screen. While RIMM is not the big cap stock of the 2008 glory days some money finally is coming back to the name after a better than anticipated earnings report. This is the first time RIMM has been able to sustain some upside momentum after earnings for at least a year. That is a good sign for bulls.

10-3-2012 11-46-47 AM

Will RIMM become the next 20 bagger like IBM in the early 90’s? Really too early to tell, but the implied volatility is in the 60’s, and for an $8 stock that is cheap enough to day trade the dips by buying ATM calls (which I have been doing) since there appears to be nice support down here. Even buying some calls going out on the cycle is not such a bad idea. After all, the competition is pretty fierce in the computer industry too and IBM figured it out. You never know but the options are cheap enough to give it a go.

AlphaVision™ – data from Bloomberg

Read more from Andrew at Option Pit

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