Betting on a comeback in Research in Motion (NASDAQ: RIMM)?

It’s been a good week so far for Research in Motion Limited (NASDAQ:RIMM) shares, which are in recovery mode. Since its intraday bottom at $63.04 on Tuesday, the shares have jumped more than 6% on decent volume. Today, the shares are attempting to push through their 20-day moving average and fill the bull gap created by its December 18th earnings report. Technically speaking, it’s a big day for RIMM and investors are paying attention.

With about three hours left in the trading day, more than 13 million shares have already traded in RIMM today, with three million hitting the tape during the first half hour of the session. Average daily volume in RIMM, for the past three months, is approximately 16 million shares. Shortly after 10:00 AM Eastern time, we spotted two notably large blocks of stock trade, as 49,600 crossed at $66.48 and a block of 50,000 traded at $66.00. Shortly after that, massive blocks of 100,000 and 99,200 shares changed hands with the stock trading at $66.50.

Around the same time, we saw action in late-dated call series. A block of 2,000 January 2011 85 calls was sold at $4.90 per contract, while a block of 3,000 January 2012 95-strike calls was likely sold to open at $7.25 per contract. Remember that a block of 3,000 options essentially controls 300,000 shares of stock.

This call seller may have executed a buy write, which is similar to a covered call strategy except that the stock and option trades are conducted at the same time. The investor is likely long the stock trade and short the upside calls. The 85- strike is out-of-the-money by about 27%; the 95-strike call by 41%. This strategy would be betting on moderate upside (up to the 85 mark by next January) and declining implied volatility.

Yesterday, we saw investors rolling front-month calls out to the February 65 call strike, as presumably they expected more short-term upside in the shares. Open interest at the February 65 call expanded from 16,741 to 20,287 this morning.

For more on RIMM:

Rolling Ahead in Microsoft (NASDAQ: MSFT) and Research in Motion (NASDAQ: RIMM)

RIMM Put Options Heat Up

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