Research In Motion Update

Research In Motion (RIMM, $123.46, down $18.88) got one yesterday, falling 13%, after the market digested its earnings report. The stock peaked as high as $148 just a week ago, and has now fallen to its lowest level in two months. The stock was down another $1.26 in after-hours trading to $122.00. Yesterday was a bad day for RIMM and only time will tell if current support will hold at the $120 level. I mentioned on Wednesday that the stage was set for a big, big move either way and we got just that. If you played a strangle option trade with the two options I mentioned then you now have a decent profit. The July 130 puts (RULSV, $9.85, up $5.93) were the big winner as they easily more than doubled from an entry price of $3.90. The July 150 calls (RULGJ, $0.40, down $5.00) fell over 90% but here is the beauty of this trade once again. The entry price for both contracts came in around $9.30, $3.90 for the puts and $5.40 for the calls. The puts are worth $9.85 and the calls are worth $0.40 so the value of the two is $10.35. This gives us nearly a 10% profit in one day. Ten contracts would have made you over $1,000 in one day. With RIMM trading lower in after-hours, here’s the plan. Since the puts are now deep in-the-money, they will move dollar for dollar if RIMM keeps going lower. We can close the puts today and bank those profits which would guarantee at least 10%. We would keep the call options open since they are nearly worthless but have the chance to rebound if RIMM can make a furious comeback over the next few weeks. We have created a risk free opportunity to make even more money if RIMM rebounds. Even if these calls expire worthless a 10% gain is a guarantee. That might not sound like much but if you can make 10% a day or even in a week then you are well ahead of the game. I’m not sure where RIMM will open this morning but let’s hope it continues lower then hope for a big rally by July 18 which is when the July options expire. [Note: Apple (AAPL, $168.26, down $9.13) fell 5% in sympathy yesterday] Rick Rouse Rick@OptionsMentoring.com]]>

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