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Why Everyone Should Be Shorting $RIMM

|Includes: AAPL, BlackBerry Ltd. (BB)

Sometimes the market just gives you trades. A short on $RIMM, accomplished by selling the June 70, and after taking profit, the June 65 calls, is just the trade that fell in my lap. Two factors are making this trade possible: high volatility and $AAPL's WWDC conference on June 7, where the company is widely expected to announce its next generation iPhone. Combine those factors with great looking technicals, and this trade starts looking like a perfect storm.

Fundamentally, $RIMM is losing the fight. The main selling point of all of the phones? The physical keyboard and corporate adoption. Two diminishing selling points as $AAPL and $GOOG continue to push out corporate security features to their respective operating systems. Enhanced keyboard AI is also making it possible for a virtual keyboard to rival the performance of its physical counterpart. $RIMM's answer to the touchscreen market: the Blackberry Storm, a complete failure.

While $RIMM scrambles to catch up to the features of phones already on the market, $AAPL and $GOOG are both looking to push next generation features to their phones, with $GOOG pushing Android 2.2 "Froyo" last week at their Google IO conference and $AAPL looking to beat $GOOG at their WWDC Conference June 7. $RIMM isn't even in the race! 

The $RIMM chart is looking terrible, a strong downtrend starting on April 15 is looking tough to break. Even today, with the market up ~2%, $RIMM is finding it hard to hold its gap up at the open.

The trade: Because the 200 day moving average has been a strong support and resistance level on this chart, I opened my trade by selling the June 70 calls and buying the June 80 calls for a net credit of ~$0.70. After reaping 80% of the net value of that trade after only two days, I closed the short end of that trade and went short the June 65 calls yesterday. To mitigate some of the cost, I sold a bull put spread by selling the June 50 put and buying the June 40 put for a net credit of ~$0.80

The ultimate bet. $RIMM is going nowhere.  


Disclosure: Short the June 60