Unusual Activity in RIMM

Besides a slight scare from the Speaker of the House today, the market rallied in fine style.  It could not break out over 1422 on the SPX but most of the market did well.  Volatility did come down a touch too as the short end of the market started to catch up with what the longer end of the volatility market has been doing.  It looks like we are setting up for a rally to the end of the year as long as some sort of something comes out of Washington.  We would have a nice Hollywood moment if the politicians got it together before Christmas.  Wishful thinking anyway and I won’t bet too heavily on it.

I think some name activity was interesting today.  Instead of spending some money on toys and presents folks were out there buying stocks.  They were buying RIMM.  The screen below shows option trading above their 20 day average volume for all traded series.  The way to think of this is divide the daily volume by the number of series with a bid and get an average volume per series.  If today’s volume is over that number it shows up as a spike in Option Vision.  The RIMM Nov30 Weekly 12 calls 2.6x more active than the average volume number for trading series.  That is a lot for a busy name like RIMM.

 

OptionVision Relative Volume View   from ORATS and Aqumin LLC

Also note the building was red, which indicates the volatility was down as no doubt call writers came in by the droves to sell the strike.  There is an old saw that volume begets volume and the activity on the strike was pretty big.  RIMM is enjoying some hype on the new phone and a Goldman upgrade and today is more of the same momentum wave.  I would not be surprised at all if RIMM settled $12.

The Trade

The game might be over for the Nov cycle but I think RIMM can trade higher than $12 in the Dec cycle.  Today’s Nov selling frenzy was an unwinding of cheap calls and the inverted upside skew in the Dec ordinary cycle looks good for buying a RIMM Dec 11/14 calls spread for about $1.  That would give traders plenty of time to be out before the actual phone launch.

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