Monday, September 19, 2011

Trade of the Day: RIMM November $26/$20 risk reversals

The Trade: 
A trader bought 6,000 November $26/$20 bull risk reversals, for an $0.80 debit, or $480,000.

In the first hour alone, $850,000 in call premium was purchased and $795,000 in put premium sold. At the close, the call premium purchased was $50,000. RIMM has been hit hard since earnings were released last Friday. However, RIMM remains cheap at 4.9x earnings, 0.6x sales, 1.26x book and 20x cash flow. The trader is willing to be long at $20, a great trade if you see $20 as a valuation bottom. RIMM closed trading today at $23.72, down $0.21 or 0.88%.

The yellow line represents the underlying price the trader is willing to be long. The green line is the strike price of the underlying.

*Special thanks to Option Radar, BMO Capital, MEB Options, Bloomberg, Reuters, Optionistics, LiveVolPro, CBOE, AMEX, Option Monster, T.O.P. group, and all of the options desks and traders we work with to provide the option flow!

No position at this time. Position declarations are believed to be accurate at time of writing but may change at any time and without notice.

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