Riding on RIMM

Research in Motion (RIMM) is the maker of the popular BlackBerry handheld device. The stock can be quite a roller coaster and is popular with some day traders. Well, I have not been day trading this stock, but I am currently in a trade on RIMM.

I entered a bull put spread trade on Jan 5th with RIMM at a price of $138 per share. I bought the Feb 110p and sold the Feb 115p for a net credit of .55. This is a nice 12% return providing the stock stays above $115 per share on the third Friday of February.

I saw a recent sideways trend with strong support at 125 and 120 and strong overhead resistance at 142-143. I didn't expect a big move above the current price so I would not consider a bullish directional trade. I also ruled out a bearish directional trade because the previous trend was up and a break out of the channel would likely be to the upside.

Looking at the options chain, I noted that the 110/115 puts were serving up a pretty nice premium and a very unlikely chance of expiring in the money (below 115). I placed my order overnight for a .55 credit DAY and was filled early after the opening on the 5th.

Little did I know that in just a few days Apple (AAPL) would announce the new iPhone. AAPL stock jumped up and RIMM took a beating. But RIMM stayed inside the channel and held at 130. Since then it has tested and broke the 125 support level and recently bounced nicely off of the 120 support level.

Right now my position is slightly underwater but with the flexibility of the bid-ask spread I could get out at about break even. This also means that I could probably get into this same trade at the .55 credit and 12% return. The 120 support held nicely and both the MACD and Stochastics indicators are low and rolling up. With just 23 days remaining, the Feb 115p has a 85% chance of expiring worthless. I like those chances so I'll hang on and ride the RIMM.