Earnings Idea
BlackBerry (BBRY)
Although scheduled to report earnings Thursday before the opening with a consensus estimate of -.28 per share, the real story will be about the early sales report on the new BlackBerry 10 devices and the hype generated by mobile takeover ad campaign starting Monday. Forbes says, “Those mobile takeovers will fill your screen with what looks like a BlackBerry 10’s, demoing a specific feature like its photo “Time Shift” capability that allows you to scroll through several captured options for each face in a picture.”
First the option data.
The current Historical Volatility is 76.50 and 71.96 using the Parkinson’s range method, with an Implied Volatility Index Mean of 88.17, up from 87.29 last week. The IV/HV ratio is 1.15 and 1.23 using the range method to calculate the HV. The 1.45 put-call ratio is bearish with Friday’s volume of 426,543 contracts traded compared to the 5-day average volume of 213,670 so this one is generating a lot of interest going into the reporting event.
Consider this long call spread with a short put.
Although the March 28 put shown above at .55 is based upon Friday’s mid price it will be substantially less Monday due to time decay over the weekend. Before any price change, it should be about .33 turning the credit into a .18 debit. With a favorable volatility edge, be prepared to take the stock by assignment in the event it closes below 14 at the close on Thursday. If assigned, the position will be long stock so sell covered calls, as the implied volatility is still likely to remain relatively high. In the event it opens higher Monday, eliminate the put leg unless the premium is at least .25. Use a close below 13 as the SU (stop/unwind).
High IV/HV Ratio
Uni-Pixel, Inc. (UNXL)
While this one is not our top ranked for high implied volatility relative to its historical volatility it is one of the more controversial technology stocks with recent insider selling, a high short interest and rapidly rising price with the launch of its UniBoss and Diamond Guard flexible electronic products. Since there are considerable details available at Seeking Alpha, we encourage a thorough review of the downside risk before deciding to take this controversial speculation.
The current Historical Volatility is 99.05 and 95.25 using the Parkinson’s range method, with an Implied Volatility Index Mean of 122.12, up from 103.14 last week. The IV/HV ratio is 1.23 and 1.28 using the range method to calculate the HV. The bullish .3 put-call ratio tops the list but Friday’s volume is light at 10,678 contracts traded compared to the 5-day average volume of 9,570 making it thin with wider bid/ask spreads.
Since additional partnering information is due for release at their next earnings report date in late May, implied volatility is likely to remain relatively high, so a near term put sale at a strike price below the recent upward gap seems like a reasonable risk.
With a good volatility edge, it could go higher before expiration. In the event it closes below 20 at the April expiration, be prepared to take the stock by assignment and then sell calls against the long stock position, as the implied volatility will most likely remain high until the May reporting date.
The suggestions above use the closing middle price between the Friday bid and ask. Monday, the option prices will be somewhat different due to the time decay over the weekend and any price change.
Summary
The recent increasing implied volatility reflects the market direction uncertainty after a week of digesting new macroeconomic risk from Europe. From a technical perspective, it appears another continuation pattern is underway. However, be prepared as it could also be the start of a more pronounced correction.