Monday, January 28, 2013

Research in Motion (RIMM) - Staying or Leaving… Forever? Let’s Ask Again on Wednesday. Vol at Multi-Year Highs

RIMM is trading $16.17, down 7.8% with IV30™ up 6.1%. The LIVEVOL® Pro Summary is below.


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I found this stock using a real-time custom scan. This one hunts for elevated vols. I do note that the IV30™ for RIMM is in the 100th percentile, indicating an annual high. In fact, the implied is at multi-year year highs.

There is news due out on RIMM’s much anticipated version 10 – the “make or break” model, and that news is coming on Wednesday of this week.

Custom Scan Details
Stock Price GTE $5
IV30™ GTE 30
IV30™ Percentile GTE 80
Average Option Volume GTE 1,200

The goal with this scan is to identify short-term implied vol (IV30™) that is elevated to its own annual history (at least in the 80th percentile). I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume), and I want a minimum vol level so I don't pick up any boring ETF’s (or whatever). The stock price requirement helps me identify names that have enough strike prices to trade or spread.

Let’s start with the two-year RIMM Charts Tab below. The top portion is the stock price the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

On the stock side, we can see the stock drop from ~$70 two-years ago to as low as the $5 range, and now back to ~$16. I’ve written extensively on RIMM, with the main theme being quite simple: “The potential that the firm was on the verge of Obsolescence.” There’s no doubt that iPhone crushed Blackberry, then Android and Samsung double and tripled down. RIMM was almost a $150 stock back in 2008.

On the vol side we can see that the IV30™ is in fact at multi-year highs. That does make sense, and the implied way well rise into Wednesday, potentially making consecutive multi-year highs in vol.

There is a shorter-term story. I have included the same chart but just a six-month period, below

In this chart we can see the impressive recovery in stock price. This stock was very much on the verge of becoming a penny stock (regardless of the revenue numbers) and has ripped back to relevancy on the promise of Blackberry 10.

Let’s quickly turn to the Skew Tab.

Here we can see that “the event” seems to be coming out this week (note the red line are the Feb 1 weekly options).

Finally, let's look to the Options Tab (below).

Across the top we can see the vol in the Feb01(W) options – priced to over 132%, then a monotonic drop of as we move forward in expiries. While there has been some speculation that the “leaks” of information from RIMM which have moved the stock higher have lessened the impact of the actual news due out his week, the option market would disagree. Let’s keep our eyes on this on – is RIMM staying or leaving?

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This is trade analysis, not a recommendation.

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