By Jeff Kearns and Hugo Miller Dec. 9 (Bloomberg) — Traders are snapping up options on Research In Motion Ltd. , betting the shares will climb 31 percent in five weeks as sales in China accelerate. Investors buying contracts to purchase RIM for $80 through Jan. 15 helped drive bullish contracts on the stock to twice the level of bearish ones, the highest ratio since March 2006, according to data compiled by Bloomberg. The last time so-called calls outnumbered puts by as much, shares of the Waterloo, Ontario-based BlackBerry maker quadrupled in 19 months. Traders are speculating RIM will rebound from a 26 percent decline since the company forecast sales in September that were below analysts’ estimates, said Nick Agostino , an analyst at Research Capital Corp. in Toronto who has recommended the shares for more than three years. RIM is expanding distribution in China and its BlackBerry Curve surpassed Cupertino, California- based Apple Inc.’s iPhone as the top-selling consumer smart phone last quarter, helped by price cuts. “People are realizing the haircut the stock has taken since the last quarter was overdone,“ Agostino said. “People were looking for further deterioration in the business model, and what they’re seeing recently from sales channels is signs of what could be a stable quarter.” The stock must rise 31 percent from yesterday’s close of $61.16 in U.S. trading to reach the so-called strike price on the January $80 contracts. Calls give the right to buy shares for a given price through a certain date, while puts convey the right to sell. RIM hasn’t closed above $80 since September. Lower Than Estimated Shares of RIM have fallen since the company said Sept. 24 that revenue for the three-month period that ended Nov. 28 would be as low as $3.6 billion, less than the average analyst projection of $3.91 billion, according to data compiled by Bloomberg. January $80 calls have more than doubled since Dec. 4 to 96,650 contracts, the highest so-called open interest for RIM options. That’s the steepest rise among the company’s options during the past two weeks, according to data compiled by Bloomberg and Trade Alert LLC, a New York-based provider of market analytics. The company said yesterday that it will sell a BlackBerry customized for China and partner with an affiliate of Lenovo Group Ltd. to increase business in the world’s biggest mobile- phone market. On Dec. 7, RIM reached an agreement to expand distribution through Digital China Holdings Ltd. Both Lenovo and Digital China are based in Hong Kong. ‘Growth Potential’ “That has shown people there is international growth potential in the stock,” Agostino said. RIM gets more than 70 percent of its revenue from North America, according to data compiled by Bloomberg. The RIM options rose 14 percent to 50 cents yesterday. Trading volume exceeded 25,000 contracts on Dec. 4 and Dec. 7. “Upside call buying remains the theme,” options strategists at Susquehanna International Group LLP in Bala Cynwyd, Pennsylvania, wrote in a Dec. 7 report. “This trading suggests investors are using these relatively inexpensive calls in order to position for significant move to the upside in shares over the coming months.” To contact the reporters on this story: Jeff Kearns in New York at jkearns3@bloomberg.net ; Hugo Miller in Toronto at hugomiller@bloomberg.net .
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RIM Bulls Bet on 31% Rally With Options as BlackBerry Maker Targets China
