Strangle on RIMM

How many people are into these? I took a very small position on RIMM as earnings are coming up on Thursday. I did $20 OTM and wanted to see how this would turn out. I practice traded this for 4 quarters before actually implementing with real money, and taking a very small position, just in case it does not go well.

I did the Oct120C and Oct80P. We'll see how this goes. There is still some time and the options were not overpriced. Expiration is in 2.5 weeks. What I've found is because RIMM is not right near expirations with their earnings, if you buy the day before, they are often pumped up. It's often best to buy 3+ days prior to earnings before they start inflating the options.

Most of the earnings in the past 3-4 yrs, there typically is a $20 move in either direction of earnings announcement. And, usually the few days before earnings, the stock does not really move a lot, often staying around the same closing.

As I looked at the stock yesterday, $100 seemed like a good round number. As I was out and about and no access to my charts, had to remember what RIMM looked like and make a decision, as I did not want to buy on Tues, rather on Monday.

Though the low on Friday was near $96 and the $95 would be ATM and +/-$20 would be $115/$75, that somehow didn't seem to be the right strike or looked quite right on the graph. While at the zoo with my son, $100 seemed intuitively to be more what the graph should look like, as the few days before earnings would look like it didn't move much for the closing price.

Of course, RIMM's traders don't really care what I think and will do whatever it wants to do. I could be very wrong, so hence the very small position. $100 just seemed good to me based off of the research and analysis I did the past 3-4 times for earnings. If RIMM continues in the same pattern as before, I should be okay. If it turns out right, I get to make money, if not, then the cost is not too big.
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1 Response
  1. Anonymous Says:

    good call!!! Congrats!!!
    have a great weekend. :-)

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