Tuesday, November 8, 2011

Research in Motion (RIMM) - Stagnant Stock, Elevated Vol, Weekly Vol Diff

RIMM is trading $18.66, down 1.2% with IV30™ up 0.4% as of ~11:30am EST. The LIVEVOL® Pro Summary is 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 has some interesting stuff goin' on with the vol and realized stock movement. Let’s start with 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).

On the stock side, just an awful ride down for shareholders. It’s incredible to think that this was a $70 stock less than a year ago. RIMM is struggling with the possibility of obsolescence. The last two earnings cycles have been ugly, prompting abrupt stock gaps down.

On the vol side, we can see that the implied is elevated to the two historical measures, and with good reason. It is interesting to note that the short-term realized historical vol (HV20) is depressed right now – a reflection that the stock has been stuck in the same spot(ish) for a few weeks.

Let’s turn to the Skew Tab.

I’ve included the weekly options (red) as well as the two monthly expirations (Nov and Dec). We can see the wings in Nov monthlies are priced above Dec, while the Dec ATM options are substantially more expensive (in terms of vol) than the Nov monthlies. It’s likely that RIMM’s next earnings release will be in the Dec expo cycle and thus the elevated vol.

Finally, let’s turn to the Options Tab for completeness.

I wrote about this one for TheStreet.com (OptionsProfits), so no specific trade analysis here. But, there are some interesting positions worth examining while still avoiding the Dec earnings vol. The weekly options in RIMM are priced to low vol relative to the Nov monthlies as the underlying has stayed relatively still. This is an interesting case where selling the lower vol has some rationale -- an interesting exercise to examine how RIMM does in the next four trading days relative to that weekly options vol.

This is trade analysis, not a recommendation.

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