RIM's Rally Providing Cheap Calls For Bulls

| About: BlackBerry Ltd. (BBRY)

This week shaped up to be one of the best Research in Motion (Nasdaq: RIMM) has enjoyed in some time, as the company's stock has experienced a considerable uptick in value. What's most interesting is that the stock is rising despite the handset maker continuing to be the laggard in the increasingly competitive world of mobile technology.

Calls Worked For Many Investors

Prior to RIM releasing its second quarter earnings report on Thursday, I told you about some of the reasons I was bullish on the stock. I also pointed out some options strategies that made for good plays for RIM in the near term, suggesting that I thought the stock had no place to go up from the $6 level where it began the week; and indeed that's exactly what it did.

Investors who were bullish, like me, bought and sold September calls and made some handsome profits. They bought calls that were above $7 before they expired on Thursday, and ahead of the second quarter earnings report release, in which the beleaguered stock beat estimates.

RIM was up 20% on the news of second quarter earnings being higher than expected. Specifically, revenues were up 2% to $2.9 billion from $2.8 billion for the first quarter. Still, the company warned that there will be continued pressure on operating results for the remainder of the fiscal year. These pressures include lower handset volumes and the increasing amount of money the company is spending to market BlackBerry 10.

RIM's rally started the day its chief executive officer, Thorsten Heins, said that the company had added two million subscribers, bringing the total to 80 million. The company's ability to add subscribers without even having the newest BlackBerry smartphone or operating system to offer them is impressive to say the least.

On Monday, RIM opened for trading with a volume of about 20 million and a price of $6.37. By Thursday, the volume traded had increased to 72 million and the price had risen to $7.20. Then, the stock hit $8.20 during intraday trading on Friday, the day after company execs discussed second quarter earnings. The volume was a whopping 122 million; the average volume (three months) is 22 million.

Waiting On BlackBerry 10

Consumers and market players have been waiting for the release of the BlackBerry 10 all year, only to be repeatedly disappointed. However, Heins confirmed Friday that the release would come sometime during the first quarter of next year. Heins has been actively hyping the company this week during its BlackBerry Jam event. He ended the week with an interview with CNBC, in which he said the new BlackBerry will be "mind-changing."

Heins refused to pinpoint an exact date during the first quarter that the new device will be available for sale, which let some of the wind out the stock's value for me. There is a lot riding on RIM being able to turn a significant profit from the new phone to help right its sinking financial ship. Considering this, I don't see much of anything else happening during the interim that could help RIM maintain its stock's upward movement.

While RIM continues to test and prep its Blackberry 10 for release, most consumers aren't going to wait, especially with the holiday shopping season quickly approaching. Handset makers wanting to reap the benefits of this lucrative period have already released their new phones, including Apple (Nasdaq: AAPL), which reports it sold five million of the highly-anticipated iPhone 5s during the first weekend after it was released. Then there's Samsung, whose Galaxy S III was released this summer. Powered by Google's (Nasdaq: GOOG) Android operating system, this smartphone continues to be hugely popular. Nokia's new Lumias, powered by Microsoft's (Nasdaq: MSFT) Windows Phone 8 will be available for sale in November, also providing fresh competition for RIM.

More Options for Bulls

So I'll turn your attention again to the options market. By late Friday, investors were already piling in, driving the volume traded for the October call with an $8 strike price to about 23,000. There's considerable sentiment that RIM could even climb to $10 by the January expiration date, according to the options activity for that strike price. Volume for it was about 10,417.

To go out a little further and look at how the stock may trade based on the imminent release of the BlackBerry 10 next year, consider options expiring in January. On Friday, calls with a $10 strike price were $.45, and those with an $11 strike price were $.35. If you are bearish and think that there's little chance RIM will be able to even maintain its current price above $7.50, look at the put with a strike price of $6. As of Friday it was $.45.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.