Wednesday, November 23, 2011

Research in Motion (RIMM) - New Low, Vol Popping... Is RIMM Risking Obsolescence?

RIMM is trading $16.41, down 2.7% with IV30™ up 4.7% as of ~11:25am EST. The LIVEVOL® Pro Summary is included below.


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Research In Motion Limited (RIM) is a designer, manufacturer and marketer of wireless solutions for the worldwide mobile communications market.

RIMM stock has performed horribly this year and in all frankness, there's a non-trivial risk that the company‘s product (and by default the company itself) may be facing obsolescence.  Let’s turn to the Charts Tab (6 months), below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).

I know it seems unbelievable, but this was a $70 stock within the last 12 months. It has reached a new 52 wk low today. On the vol side we can see the implied is well elevated to the historical measures – with the stock performance and outlook, that actually makes sense. Specifically:

IV30™: 87.73
HV20: 50.37
HV180: 66.63

Note also in the stock chart, the catastrophic stock returns after earnings. RIMM’s next earnings release should be in the Dec monthly expo cycle… so brace yourself.

Let’s turn to the Skew Tab, below.

I’ve excluded the weeklies and just kept the front two monthly expirations. It is interesting to note the upside skew – the option market reflects upside potential / risk – perhaps that’s takeover “stuff” or simply the fact that the stock is down 77% from it’s annual high (so a rebound is possible?).

Finally, let’s turn to the Options Tab.

I wrote about this one for (OptionsProfits), so no specific trade analysis here, but I will say that there are some interesting trades to analyze in that option chain, specifically focused on the downside puts and ratios. This type of trade (a 1x2) allows for a credit, meaning if the stock rallies (or stays here), the trade is a win. If the stock goes down, the trade is a bigger winner, but if the stock collapses to single digits in the next month – it's a big loser. If that sounds like a payoff strategy you like just recall the prior earnings cycle results as a final risk check.

This is trade analysis, not a recommendation.

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