Why large put seller is targeting RIMM

Research In Motion is trading near multi-year lows, but one large trader is betting that it will hold its ground.

optionMONSTER's tracking systems detected the sale of about 19,000 March 24 puts, most of which priced for $3.20. Volume was almost 3 times open interest in the strike.

RIMM fell 0.52 percent to $26.79 yesterday and has lost more than half its value this year as customers shift from its BlackBerry devices to Apple iPhones and Android handsets. Revenue missed expectations the last time the company reported earnings on June 16, and management issued weak guidance.

But the company is cutting jobs and buying back shares, and RIMM seems to be finding support between about $23 and $25--a price range last seen in 2006. Some investors may also consider the stock inexpensive because it's valued at 4 to 5 times earnings, and its enterprise value is also just 2 times EBITDA. In contrast AAPL trades at 10 times EBITDA while Nokia and Ericsson fetch multiples of about 4 and 5 times.

Yesterday's put seller is essentially betting that RIMM will hold its current range and is waiting for time decay to erase the value of the puts sold short. (See our Education section)

The next earnings report is scheduled for release after the bell on Sept. 15.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.