Unusual Options Activity: BlackBerry (BB)

Mobile security system developer BlackBerry (BB) surged higher last week on a rumor that the company was going to be bought out. One trader is betting that the rumor is false and shares will trend lower in the coming weeks.

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  • That’s based on the September 22 $5 puts. With 23 days until expiration, 8,407 contracts traded compared to a prior open interest of 292, for a 29-fold rise in volume on the trade. The buyer of the puts paid $0.30 to make the bearish bet.

    BlackBerry shares recently traded at about $5.30, so shares would need to drop about 6 percent for the option to move in-the-money. Shares traded in the $4.50 range before the rumor broke.

    While the company is still remembered for making early smartphones with built in keyboards, the company has shifted towards wireless securities for technologies such as self-driving vehicles. The shift has turned it into an early-stage tech company.

    Action to take: Investors may want to hold off on buying shares for now. If the rumor isn’t true, the price will drop and they’ll get cheaper in the coming days. If the rumor is true, shares have already jumped higher.

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  • For traders, without confirmation of the rumor, it’s more likely that the share price will drop over time until it’s either confirmed or debunked. That makes the late September $5 puts inexpensive and ideal to play a drop lower for shares.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.