Blackberry (BB) Strategic Analysis using Options

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by Baraxton

Hey ladies and gents, hope you’re having a great weekend. Just dropping in a quick strategic analysis on Blackberry. The details of the discussion are applicable for the week ahead and can be found below:

Expected move: +/- $3.00

  • Upper Expected move: $17.00
  • Lower Expected move: $11.00

Potential move: +/- $3.90

  • Upper Expected move: $17.90
  • Lower Expected move: $10.10

Historical Volatility: 98%

Implied Volatility: 167.2%

  • Put-To-Call Interest: 0.30
  • 10-year high: $17.21 (Feb-4-2013 the date when Research in Motion changed their name to Blackberry)
  • 5-year high: $14.55
  • 1-year high: $14.28

Bullish Trade idea (short-term):

  • 15/18 weekly Bull Call Spread
  • Debit: $0.58
  • Max Profit Potential: $2.42
  • Risk/reward: 4.17
  • Breakeven: $15.58
  • Max profit occurs above $18 at expiration

Bullish Trade idea (long-term):

  • Given the elevated implied volatility and low stock price, it is more prudent to own the equity.
  • Alternatively, $12 February monthly opex puts are trading at $1.40 and can be sold cash secured for an effective ownership price on the stock of $10.60 if assigned (this represents an 11.77% return on risk in less than 1 month)

Other considerations:

  • Next ER is in Mid March
  • BB has announced partnerships with AMZN, ZM, OnwarMobility and Huawei
  • Blackberry owns over 30,000 patents, by far the most of any company in Canada and many of which are applicable to smartphones, which they will no longer focus on.
  • Expect more patent sales, further bolstering their balance sheet.

For those of you who would like to watch the video discussing the information above, the link is here:

Please let me know if you have any questions.

Stay safe and healthy and trade well!

 

Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence or consult your financial professional before making any investment decision.

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