On Wednesday, many investors appeared eager to buy bullish call options in BlackBerry maker Research In Motion (RIM), hoping its quarterly profit will be positive and send its shares above $50.
RIM is set to report fourth-quarter earnings today. Analysts are expecting the company to earn 84c a share before one-time items on revenue of $3.4 billion, according to Reuters Estimates.
Its shares rose 5.98% to $45.69 on the Nasdaq in late afternoon trade.
The company warned in February its quarterly profit will come in at the low end of its forecasts. Still, it said it expects to add 20% more subscribers than the 2.9 million it earlier predicted.
RIM cited a variety of factors in the profit warning, including product mix, lowered channel inventory levels and a higher ratio of new subscriber sales to upgrades and replacement sales.
In the options market, some traders turned optimistic on the company's prospects and flocked to RIM's near-term call options, conveying the right to buy the company's shares at a fixed price within a specified time period.
"Option traders are now betting that the response to the actual earnings will be bullish and expect its shares to rise," said Chris McKhann, analyst at Web information site optionMonster.com.
RIM shares on 11 February opened at $50.16 on the Nasdaq, creating a gap on the chart that traders expect to fill, McKhann said. On that day, the shares dropped significantly and closed at $48.76 as investors digested the company's warning.
Late in the session, about 108 000 calls and 62 000 puts traded in RIM, double the normal combined volume, according to option analytics firm Trade Alert. A large portion of the call action was in the April contract.
"We are seeing 22 000 April $45 calls in demand where premiums have risen on the day by more than half to $3.65 in afternoon trade. Investors seem to be reaching even higher to the $50 and $55 strikes," said Andrew Wilkinson, senior market analyst at Interactive Brokers Group.
"It appears that they are anticipating that its shares will react positively to the report and recapture a $50 price label," Wilkinson added.
As of Tuesday's close, overall contracts outstanding in RIM stood at 735 742, with 1.6 times as many open call positions as puts, Interactive Brokers Group data show.
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