Why BlackBerry Stock Burst Today

What happened

Shares of BlackBerry Limited (NYSE: BB) – the former smartphone manufacturer, now a specialist in security software – rose steadily throughout the trading day on Friday and finally ended with a plus of 10.8% due to the closing bell.

so what

There doesn’t seem to be any obvious news behind the stock’s rally today, except for one thing: According to TheFly.com, options activity in today’s BlackBerry trading has been unusually positive as 20% more call options have been bought than usual. This is a bullish signal because buying “calls” allows a contract buyer to force a contract seller to sell the stock at a specified price until a specified time in the future.

Options traders, of course, buy calls when they expect a stock to go up – the idea is to acquire the right to buy stocks at a price that is below the stock’s market price. In the case of BlackBerry, the calls to puts ratio (options that give the right to sell the stock at a set price – a bearish bet) today was 10 to 1 – and that seems very bullish indeed, or shows at least great optimism on the part of the options traders.

Image source: Getty Images.

What now

What made these traders so excited? Well, BlackBerry is expected to post its fourth quarter earnings on March 31st. Analysts believe the stock is only expecting earnings of $ 0.03 per share for the quarter, which is a 67% year-over-year decline and a 15% decline in revenue (projected to be $ 246.4 million) .

If any of these numbers turn out to be less bad than expected – or if BlackBerry just gives a good forecast for the quarter ahead (when analysts expect earnings per share to be just $ 0.01), the folks who talked about BlackBerry today might Buy Options, Do This Make a decent profit in a couple of weeks.

This article represents the opinion of the author who may disagree with the “official” referral position of a Motley Fool Premium Consulting Service. We are colorful! Questioning an investment thesis – including one of our own – helps us all think critically about investing and make decisions that will help us get smarter, happier, and richer.

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