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Research In Motion  
About The Company
Market Cap 30B
Revenue (FYR) $15B
EPS (TTM) $5.85
Shares Out. 521.8M
Book Value $13.64
P/E 10.9x
Price/Sales (FYR) 1.8x
P/Cash Flow (TTM) 8.7x

Research In Motion Ltd is a profitable Communications Equipment company that trades on the TSX and the NASDAQ. Research In Motion Limited (RIM) is a designer, manufacturer and marketer of wireless solutions for the worldwide mobile communications market. Through the development of integrated hardware, software and services that support multiple wireless network standards, RIM provides platforms and solutions for access to information, including e-mail, phone, short message service (SMS), Internet and intranet-based applications. RIM's portfolio of products, services and embedded technologies are used by organizations worldwide and include the BlackBerry wireless solution, the RIM Wireless Handheld product line, software development tools and software. RIM operates offices in North America, Europe and Asia Pacific. 

 

 

 
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By using this site, you agree to be bound by its terms of use. The full terms of use can be read here. If you do not agree to the terms of use, do not access or use this site.
Nothing presented is financial advice, trading advice or recommendations. Everything presented is the author's ideas only. The author accepts no liability for its use including errors and omissions. You alone are solely responsible for your own investing and trading. There are considerable risks involved in implementing any investment strategies and losses can be large. Trade at your own risk.

 
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  RESEARCH IN MOTION (RIM) - 2010
ONGOING EVALUATION & TRADE - Year 2
This trade is taking place on the TSX. (RIMM - NASDAQ) The same trade could be done on the NASDAQ.
This is a trade using the 10-20-30 strategy of moving averages (read the 10-20-30 trading strategy paper here) for timing of my option trades. Nothing on my site is financial advice or recommendations.

GOAL: Average 15% a year in income

OBJECTIVE: I am using the 10-20-30 strategy of moving averages to assist in deciding when to sell puts and calls and buy to close them. If at any time I am holding shares, it will be for short periods only. The focus is on selling option positions for income to meet the goal.

SUMMATION:  My chart with each transaction, shows how I am interpreting this rule and applying it to assist my decision making process to time my trades. I am following this strategy to see if I can use the 10-20-30 moving averages strategy consistently for profits. There is no fool proof way to invest in stocks. I am aware that I cannot just blindly follow a technical indicator but must look at numerous factors.

By writing up each of my trades I can build a history to re-examine each trade to determine what factors I am considering that are working and which factors are not. I will keep my quantities to within 5 contracts for each position taken. I am also doing a smaller number of contracts to see if even with a small capital I could use this strategy.

I am also aware that the strike position taken has a large impact on not just income, but also on risk. I am always focused on risk and plan to stay out of the money with my strikes as much as possible.

**Notes on the percent return - I am not breaking this trade down by month or day or year. Instead I am taking each position and calculating the simple percent return on the trade position over the period of the trade. Percent returns in brackets indicate percent given back when the position is bought to close (BTC).
BTC = Buy To Close    STO = Sell To Open

RIM TRADES BY YEARS
VIEW RIM-2011 TRADES
VIEW RIM-2010 TRADES
VIEW RIM-2009 TRADES
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Should you find my strategy and ongoing evaluation of this trade of value I hope you will consider a tip for the time I spend detailing out this trade. I have set up a Paypal account for those who would like to donate. Thank you in advance. Remember, nothing on my site is financial advice. They are just my ideas and opinions. Investing is risky and losses can be large. Trade at your own risk. Read the terms of use

 

 

YEAR 1: 2009 - Trade Commenced Jun 2 2009
Goal for 2009: 7% (7 months)
Strategy: Sell Naked Puts Until Assigned
 
Capital In Use At End Of 2009 104,007.00
Income Earned in 2009 (7 months) 9,070.50
Return On Capital in 2009 (7 months) 8.7%
   
YEAR 2: 2010
Goal for 2010: 15%
Strategy: Sell Naked Puts Until Assigned
 
Capital In Use At End Of 2010 32,000.00
Income Earned in 2010 12,533.25
Return On Capital For 2010 39.16%
   

 

 

 

TRADE COMMENCED June 2 2009
GOAL FOR 2010: 15%

ONGOING STRATEGY - 10-20-30 Moving Averages Strategy

 

Capital
Committed
JAN 6 2010: With the new year the downtrend has continued with RM. The 5 and 10 day have crossed the 20 day and are working their way to the 30 day. You can see in the chart that the 5 day rapidly movd up with the earnings news and then the 10 day never caught up. The 5 day pulled back and now is falling with the 10 day. The only deviance is that the 10 day is stalled at 70 while the 5 day continues to move lower. Meanwhile resistance remains at 74.00 and support at 60.

 

Jan 6 2010 67.78 STO 5 Calls Feb 74 @ 1.05 1.4 500 68.01 13.25   (34007.00) 511.75 9582.25 179,007.00
JAN 11 10 66.63 BTC 5 COVERED CALLS JAN 68 @ .61
Comments: Capital committed does not change as these are covered calls
(0.89) 500 68.01 13.25   (34007.00) (318.25) 9264.00 179,007.00
JAN 11 10 66.63 STO 5 COVERED CALLS FEB 68 @ 2.40
Comments: Capital committed does not change as these are covered calls
3.5 500 68.01 13.25   (34007.00) 1186.75 10450.75 179,007.00
Jan 15 10 67.96 Expirations: 5 Naked Calls Jan 76 Expired   500 68.01     (34007.00)     141,007.00
Jan 19 10 64.70 BTC 5 Calls Feb 80 @ .15   500 68.01 13.25   (34007.00) (88.25) 10362.50 101,007.00
Jan 26 10 65.60 BTC 5 Puts Feb 60 @ .59 (.90) 500 68.01 13.25   (34007.00) (308.25) 10054.25 71,007.00
Jan 26 10 65.60 BTC 5 Covered Calls Feb 68 @ 1.23
Comments: Capital committed does not change as these are covered calls
(1.8) 500 68.01 13.25   (34007.00) (628.25) 9426.00 71,007.00
Jan 26 10 65.60 STO 5 Covered Calls Mar 68 @ 2.55
Comments: Capital committed does not change as these are covered calls
3.7 500 68.01 13.25   (34007.00) 1261.75 10687.75 71,007.00
JAN 29 2010: Here we are at the end of January and the stock basically was stick in a range most of the month. While this may seem good for us it actually reduces the premiums in the options as the volatility declined. I closed the Feb 74 Naked Calls today at .32. It is important to remember that this is a trade, not a holding. With more than 3 weeks left of trading and just .32 cents to make I would rather close out now, locking in the profit and wait for the next trend on the stock. Right now it looks like a possible downtrend. We need volatility to return to this stock to get option premiums up.

 

Jan 29 10 67.47 BTC 5 Calls Feb 74 @ .32 (.40) 500 68.01 13.25   (34007.00) (173.25) 10514.50 34,007.00
MARCH 3 2010: It's been over a month since I last viewed RIM. I am still holding my 68.00 March calls and closing the Feb 74 calls was a good choice, otherwise I would have had to purchase more stock as the share value has moved higher. I have added the 50 day to the chart to show that the stock has recovered from its disappointing earnings. On the last move lower in Jan the stock fell to just below 65. I will therefore sell 5 naked puts at $64 for April. $64 was the same strike I was selling back in October 2009. At this stage I would normally sell the April 80 naked calls. That would bring in 1.45 in premium. However I am holding the Mar 68 since December and it's actually a pretty good spot to be in. $68.00 is a nice value on this company. If I buy back the Mar 68 and sell the April 68 I will increase my premium by about 1.35. Therefore why take on additional risk at 80, when I can make the same amount by rolling my Mar 68 covered calls to April. Therefore I am rolling to April 68 for additional premium.

 

Mar 3 10 73.18 STO 5 Naked Puts Apr 64 @ 1.00 1.5 500 68.01 13.25   (34007.00) 486.75 11001.25 66,007.00
Mar 3 10 73.18 BTC 5 Covered Calls Mar 68 @ 5.40
Comments: Capital committed does not change as these are covered calls
(7.9) 500 68.01 13.25   (34007.00) (2713.25) 8288.00 66,007.00
Mar 3 10 73.18 STO 5 Covered Calls Apr 68 @ 7.10
Comments: Capital committed does not change as these are covered calls
10.4 500 68.01 13.25   (34007.00) 3536.75 11824.75 66,007.00
MARCH 12 2010: Yesterday the stock rose to 78.78 and fell to 77.07 before closing at 77.72. Volume has slowly been decreasing. This has presented us with a bearish candle for today and again, we have bumped right up against the resistance at $78.00. This could be a great opportunity to sell 5 calls for April 85 @ 1.25. Should the stock get to this level I will buy 500 shares and turn it into a covered call. Meanwhile I believe looking at the chart there is good support around the 70 level. I will watch for further weakness and possibly consider selling the April 70 puts.

 

Mar 12 10 77.93 STO 5 Naked Calls April 85 @ 1.25 1.4 500 68.01 13.25   (34007.00) 611.75 12436.50 108,507.00
Mar 29 10 77.26 BTC 5 NP Apr 64 @ .20 (0.31) 500 68.01 13.25   (34007.00) (113.25) 12323.25 76,507.00
Mar 29 10 77.26 STO 5 NP Apr 70 @ .90 1.2 500 68.01 13.25   (34007.00) 436.75 12760.00 111,507.00
Mar 30 10 75.24 STO 3 NP APR 70 @ 1.30 1.8 500 68.01 10.75   (34007.00) 379.25 13139.25 132,507.00
APR 6 2010:

The sell off was swift and the volume large when the earnings new came out just a few trading days ago. The stock fell almost 10% in two trading days and the Oscillator showed OVERSOLD. This told me that a bounce would soon be coming and this morning I looked at a couple of strategies. I could buy to close my covered calls for Apr 68 and roll to May 68, which I originally thought was fairly decent. However the premiums were not enough and I felt it was time to get out of the stock and back to naked positions.

I therefore sold 5 naked puts for May 68 at the open. Then I bought the Apr 68 covered calls back first thing in the morning and put in an offer to sell my 500 shares for $69.95, just .05 cents short of 70.00. I thought there was a chance on the volume I saw in the morning that the stock would move up and possibly reach 70.00. I was taken out at 69.95 which mean't my cost to buy back the April 68 calls was covered, plus an additional profit of .25 cents per share was made. Overall the trade netted me 2.95 per share before commissions and has me back at the 68 strike point. I hope to roll these puts a few times but overall I think RIM is undervalued. The darling right now is APPLE which is trading at 29 times earnings while RIM is at 16 times earnings. I think RIM has lots of room to move around and should provide some good option premiums moving forward.

 

Apr 6 10 68.00 BTC 5 Covered Calls Apr 68 @ 1.75
Comments: Capital committed does not change as these are covered calls being bought and closed out - This is the end of the Covered Call Rolls. The stock was sold today as well.
(2.4) 500 68.01 13.25   (34007.00) (888.25) 12251.00 132,507.00
Apr 6 10 68.00 STO 5 NP May 68 @ 2.70 4.0 500 68.01 13.25   (34007.00) 1336.75 13587.75 166,507.00
Apr 6 10 69.95 Sold 500 shares at 69.95
COMMENTS: Capital committed changes by $68 X 500 plus the original $7.00 of commission for a total deduction from capital committed of $34,007.00
2.8 0 0.00 7.00 34968.00 0.00 961.00 14548.75 132,500.00
APR 16 2010:

STUCK IN A RANGE. So it appears Rim is stuck in a range. It's a $10.00 dollar spread. Looking at the 10-20-30 averages, the risk definitely seems to be on the downside. As of April option expiry I am only holding 5 puts for May 68. What should I do next? With the bias to the downside as indicated by the moving averages I will place my trades to the call side and sell the $78.00 strike to start. I will then sell more option positions as the stock dictates. May option expiry is May 22, about 5 weeks which might afford the options a bit more time to expiry and possibly better premiums.


Review: Since commencing the trade in June 2009, I have had held shares in RIM just once, which was at the 68 strike. I am no longer holding shares and as of Friday I am holding 5 Naked Puts for May at the $68 strike. 

As of Friday (Apr 16 2010), I have updated my chart and my strategy concerning RIM. I believe while many analysts think RIM could double in the next 12 months, they are probably wrong. The market that RIM practically created through its blackberry devices has become far more competitive and there are a lot of new entries. During the past week I was able to enjoy viewing the NEXUS ONE phone from Google with EVE and of course the IPhone. I have many friends who have dropped their blackberries and moved to the IPhone. I myself would probably consider the NEXUS ONE phone. I love their GPS using Google maps and Google earth. Walking along a street, I could take the nexus one and literally view the buildings as I walked past. The phone told me where I was and showed me where I needed to go and what the building would look like that I was trying to reach. Overall I was impressed. 

While almost all the phones can accomplish similar tasks, what this tells me though is that the market itself is becoming more fragmented. RIM, once the dominant player in a market that it created, now has to contend with selling cheaper phones and lowering or enhancing monthly subscription rates, all the while competing with more and more companies and plans. A recent article indicated that by 2010 a full 25% of the world's population will be interconnected through mobile phones and other mobile devices. Rim is trading at 14.6 times earnings. Google trades at about 25 times earnings, but Google is not RIM. It has varied streams of income being generated whereas RIMís market is far more focused. 

For RIM to increase in value, earnings must increase or at least the expectation of earnings potential has to increase for the stock to increase its multiple and move considerably higher. There remains always the ability of RIM to buy out smaller companies such as the rumor about PALM, or even the rumor that RIM may be bought out. Meanwhile RIM can move into other countries, such as they are endeavoring with China. But when entering a new marketplace they will be pitted against other companies. Mobile products in general, I believe, will begin to feel the "technology effect" where just as in other technology areas, prices continue to decline for both the product itself (the handheld) and for the plans being offered. Competition is a wonderful thing for consumers but it can and in the hand held market, probably will impact earnings growth.

I am sure that RIM will continue to grow, but the question remains whether or not the overall profit margins can mushroom as they have in the past, to delight investors and push share valuations even higher. If RIM should decide to expand and issue more shares, as so many companies has in the past, RIM will dilute shareholder value (something Warren Buffet hates) and almost always reduce shareholder value and hence share price. 

Nonetheless, since commencing in June 2009, I have generated 14935.00 through following the 10-20-30 charts of moving averages and selling naked calls and puts against those averages. During this time period the largest amount of capital at risk of being required was $132,000. On average the capital which might actually be required was around $80,000. The original goal was to gain 15% annual return on capital invested. The return to date based on 14,935 / 80M = 18.6%  with 2 months left in the first year. If it was possible to continue with the type of return, I could realize a 100% return in about 4 more years.

Factors though that could affect this return may be the stock itself. If the stock continues to trade in smaller ranges with a bias toward neutral to bearish, the volatility will decrease and option premiums will be reduced. Once premiums do not afford more than 1.5% return per month, it would be time to move to another stock, unless I want to reduce my annual goal to possibly 12%, which is still a decent return.

I think the most important objective to consider now, has to be NOT holding shares for any length of time. As I live in Canada, I would not want to hold RIM in my retirement (RRSP) account for the simple fact that I cannot sell naked options in my retirement account. The law prohibits this. Therefore the only recourse would be to own the shares and sell covered calls. I believe holding the shares could be the ultimate risk in most of these technology companies. I am far more comfortable selling naked positions and holding shares only when the positions dictate. (ie having to turn a naked position into a covered position)

Apr 16 10 72.86 Expiry: 8 NP Apr 70 expired
           5 Naked Calls Apr 85 expired
                34,000.00
    COMMENTS: NOW ONLY HOLDING 5 NAKED PUTS MAY $68.00                 34,000.00
Apr 16 10 72.86 STO 5 Naked Calls May $78.00 @ .80 1.0     13.25     386.75 14935.50 73,000.00
Apr 27 10 74.50 BTC 5 NP May 68 @ .39 (0.57)     13.25     208.25 14727.25 39,000.00
Apr 27 10 72.67 STO 5 NP Jun 68 @ 1.47 2.2     13.25     721.75 15449.00 73,000.00
MAY 10 2010: With the recent 1000 point sell off, RIM has stumbled and hit the low point of its recent trading range - $68.00, which I discussed April 16 (see below). I have closed my May 78 naked calls and will wait for a bounce to sell Jun Naked Calls.The 10 day SMA has crossed the 20-30 and 50 EMA. I believe until RIM shows significant earnings growth as well as a substantial increase in its client base, it will remain stuck in a range unable to break out higher.

May 10 10 68.44 BTC 5 Naked Calls May 78 @ .15 (0.19)     13.25     (88.25) 15360.75 34,000.00
May 11 10 70.04 STO 5 Naked Calls JUN 76 @ 1.00 1.4     13.25     486.75 15847.50 72,000.00
JUNE 1 2010: What a great pullback. We are $10.00 below the 200 day moving average! The 10, 20 and 30 day are collapsing. The oscillator is showing no overbought condition in almost 3 months but we have a bias toward oversold, but still no overbought signal. With the stock pulling back so hard, premiums are really up. I will roll my Jun 68 puts as we get closer to expiration. Meanwhile I have sold 5 naked puts for Jul 52. Imagine getting this great stock at that level. Meanwhile on a bounce I will look to sell some naked calls. I anticipate my Jun 76 naked calls will expire based on this chart. For those who are more daring than I, starting to accumulate some calls on RIM might not be a bad idea, as this stock is sure to have a significant bounce on any turn in the market.

Jun 1 10 62.27 STO 5 NP JUL 52 @ .92 1.7     13.25     446.75 16294.25 98,000.00
Jun 1 10 62.27 STO 5 NP JUN 56 @ .47 0.8     13.25     221.75 16516.00 126,000.00
Jun 1 10 62.27 BTC 5 NP JUN 68 @ 5.90 (8.6)     13.25     (2963.25) 13552.75 92,000.00
Jun 1 10 62.27 STO 5 Naked Calls JUN 70 @ 1.40 2.0     13.25     686.75 14239.50 127,000.00
JUNE 7 2010: With the news from Apple, RIM sold off even further today. I am continuing to sell naked calls. Many analysts were calling for RIM to hit 90.00 by JUNE 2010. Obviously they have accumulated stock at levels higher than where we are today. Meanwhile I bought to close my JUN 68 Naked Puts on JUN1 and with today's sell off I have sold the JUL 64 puts for almost the same value. This moves me 4 dollars lower and keeps my profit hanging on. As well on JUN 1 I sold 5 JUL 70 Naked Calls. This stock could recover, but investor sentiment towards RIM's future must change in order for this stock to recover. On the above chart you can see the 50 day moving average which is far above today's price. The 200 day moving average is around 71.50. If the stock can recapture the 200 day before my July 70 calls expire, I can turn them into covered calls through purchasing the stock. I have serious doubts that RIM will do this any time soon.

Jun 7 10 60.54 STO 5 NP JUL 64 @ 6.00 (8.75)     13.25     2968.75 17208.25 159,000.00
JUNE 18 2010: The stock remains depressed. We had a nice move back up to the 64 range a few days earlier but the stock could not recapture the 200 day moving average. The 10 day is moving further away from the 20 and 30 day. Premiums are leaving the call options, while the put options are increasing slightly in value. The July 56 put is over 1.00 today and the 54 is trading for .66 cents. I will sell some 54 or even the 52 is the stock continues to move lower. With the 200 day at the 71 strike, I have sold 5 naked calls for the 70. Should the stock reach there I will be happy to purchase stock and turn it into a covered call.

Jun 18 10 62.72 Expiry: 5 Naked Calls Jun 76 expired
5 Naked Puts Jun 56 expired
5 Naked Calls Jun 70 expired
                58,000.00
    COMMENTS: Now only holding 5 Naked Puts July 64 and 5 Naked Puts July 52                 58,000.00
Jun 18 10 64.10 STO 5 Naked Calls Jul 70 @ 1.00 1.4     13.25     486.75 17695.00 93,000.00
Jun 23 10 62.40 STO 4 Naked Calls Aug 72 @ 1.06
Comments: Tomorrow earnings come out. I don't believe there is anyway that RIM can bring out numbers that will jumpstart the shares. They need perhaps a new product or a lot more subscribers which means moving into emerging markets and China. This will take time. RIM is still a great company, but I am not convinced it will recover the highs for some time to come, if ever.
1.5     12.00     413.25 18108.25 121,800.00
JUN 23 10 62.40 BTC 5 NP JUL 64 @ 4.10 (6.4)     13.25     (2063.25) 16045.00 89,800.00
JUNE 25 2010: This morning I sold RIM Aug 56 naked puts for 3.30, rather than do the July 62. I had originally thought I would try to roll to July 62 for 4.20 and while I could get that amount, the August 56 at 3.30 makes a compelling price. I also sold 5 NP July 52 and 5 NP August 50.
The news from RIM was poor to say the least. In less than a year RIM has seen 5 major declines, which I have marked in RED. The stock is in serious trouble and I have no long term interest in owning this stock. Short term though it would not concern me at these levels. The announcement with yesterday's earnings that RIM will repurchase shares only adds fuel to the fire-sale. It is a sure sign that management wants a higher price. Instead of buying shares in the market, why not put together a small dividend or even better, come to the marketplace with a brand new, hot product that will regain some market share. Right now Apple is the RIM killer and RIM needs to act quickly to keep its customer database and grow it. Many analysts are calling for RIM to increase its profits through emerging markets like China, but what's to stop Apple from moving in the same direction? I believe the real issue is RIM had a stranglehold on the market not because they were the best, but because they were the only serious provider. Now they finally have some competition and its time for them to acknowledge it and fight back. I have seen dozens of companies fall by the wayside primarily as they are unprepared for a competitive market. It's time for RIM to wake up to the marketplace. Their decline in share price is the warning sign. They still have the upper hand, but Apple has moved from 10% market share in 2009 to 16 % this year.
For traders, day or otherwise, the stock is a goldmine. Recent investment articles have pointed to the large numbers of traders who are in and out of the stock daily. My strategy of staying with the 10-20-30 moving averages continually points to a stock in trouble. It has been unable to regain upward momentum, so the easier movement is down. I will stay with selling out of the money options. The low of the stock back in March 2009 was around the $45.50 price. I will not be surprised to see RIM grind its way lower, but first there could be a bounce in the stock and a chance to sell some more naked calls.

JUN 25 10 56.04 STO 5 NP AUG 50 @ 1.20 2.4     13.25     586.75 16631.75 114,800.00
JUN 25 10 56.04 STO 5 NP JUL 52 @ .72 1.3     13.25     346.75 16978.50 140,800.00
JUN 25 10 56.04 STO 5 NP AUG 56 @ 3.30
Comments: I had originally planned to sell Jul 62 puts and try to get 4.10 or 4.20. However with the rapid fall this morning, I decided I would roll to Aug 56 and bring in 3.30 and wait to see if the stock can hold around this level. If it does I will close this trade early for a profit. I am not interested in holding this naked put to expiry as I think the stock is in decline. See my comments below under JUNE 25 2010.
5.8     13.25     1636.75 18614.00 168,800.00
JUL 2 10 51.41 BTC 4 Naked Calls Aug 72 @ .05 (0.06)     12.00     (32.00) 18582.00 140,000.00
JUL 9 2010: Finally a little respect for RIM. Today Rim bounced more than 7% so perhaps investors have realized that RIM is not dead yet. It is though in trouble and will need to move quickly now in order to make sure that they do not lose more market share. If you look at the previous selloffs, they were followed up with a rise and then further selling. Until the technicals tell me otherwise, I think the safer side on RIM is probably selling naked calls. Looking at the above chart, RIM has not been above 66 since Mid May. I think though it could rally into the low 60's. If the rally can continue for a few more days I will start to sell out of the money naked calls at or above the $66 strike. I will be taking advantage of this rally in RIM to close my July naked puts and I will look to the rally for an opportunity to close my August 56 naked puts and roll them down lower and then finally close them as well.

Jul 15 10 57.89 STO 5 Naked Calls Aug 64 @ .73 1.1     13.25     351.75 18933.75 172,000.00
Jul 15 10 57.89 BTC 5 NP AUG 56 @ 1.84
Comments: This is a BTC of the JUN 25 sell of 5 naked puts Aug 56. I am going to roll this over the next day or two, down to 54 or reduce the number of contracts.
(3.2)     13.25     (933.25) 18000.50 144,000.00
Jul 16 10 55.41 Expiry: 10 Naked Puts Jul 52 expired / 5 Naked Puts Jul 70 expired                 57,000.00
    COMMENTS: Now only holding 5 Naked Calls Aug 64 and 5 Naked Puts August 50.                  
Jul 16 10 55.41 STO 5 Naked Puts AUG 54 @ 1.97
Comments: This is the roll of the naked puts of June 25 where I sold 5 Naked Puts Aug 56.
3.6     13.25     971.75 18972.25 84,000.00
Jul 28 10 57.68 BTC 5 NP AUG 50 @ .29 (0.58)     13.25     (158.25) 18814.00 59,000.00
JUL 29 2010: Lots of news both good and bad for RIM, has kept the stock from falling and from rising. The chart looks a little better for RIM. The MACD though shows a possible recovery underway. The 10 day needs to cross the 30 to confirm a the uptrend. There is still enough premium is both my naked calls and puts that I will consider not closing for a few more days.

Jul 30 10 59.00 BTC 5 Naked Puts Aug 54 @ .53 (0.98)     13.25     (278.25) 18535.75 32,000.00
Jul 30 10 59.00 STO 5 Naked Calls Sep 68 @ .99 1.4     13.25     481.75 19017.50 66,000.00
Aug 4 2010:  RIM just announced their new TORCH phone to compete with APPLE IPHONE and now bad news from the middle east and possibly India regarding encryption of emails and their respective governments not being able to access those emails for security reasons. The stock had a nice move higher by July 30 and looked like it might get into the low 60's. I wasn't so sure but September option premium sure seemed to be convinced so I sold 5 naked calls for Sept at 68.00. Today though I closed the naked calls as they are up more than 1% for just a few days. This frees me up to sell more calls once the stock bounces back up.
Meanwhile here we are just a few days later and the stock is down more than 10%. I think this is way overdone as RIM earns less than 1% of its total earnings from the Middle East. Meanwhile I have sold 5 naked puts for Sept at 48.00. Looking at today's chart, you can see that that low back in July was $50.06, which is why I sold the Sept $48, which would be a new low for RIM and I think offers some nice downside protection. The chart where I have circled, shows that the 10 day was crossing the 10 and almost ready to cross the 30 when the news from the Middle East came out. Looking at MACD, the mood had turned positive on the stock until yesterday and today. My hunch is that the stock will recover and go sideways for a bit. Once confidence returns I think the stock could climb back up.

Aug 4 10 54.30 STO 5 Naked Puts Sep 48 @ 1.28
COMMENTS: See my chart below for Aug 4 2010
2.6     13.25     626.75 19644.25 90,000
Aug 4 10 54.30 BTC 5 Naked Calls Sep 68 @ .36
Comments: I closed this within just a few days. Making about 1% is just a few days is worth closing. This gives me another chance to sell calls when the stock bounces back.
(0.52)     13.25     (166.75) 19477.50 56,000
Aug 11 10 58.70 BTC 5 Naked Calls Aug 64 @ .18 (0.28)           (103.25) 19374.25 24,000
    COMMENTS: Now only holding 5 Naked Puts Sep 48                  
Aug 11 10 58.70 STO 5 Naked Calls Sep 66 @ 1.01
Comments: This is an easy trade. The stock is up on good news that RIM will allow the Saudi government to get access to encrypted messages. But overall the stock is in a downtrend and until that changes it is worthwhile to sell naked calls. The Aug 64 was as easy buy back and now I can roll higher for September on today's news. I have moved to the $66 call strike.
1.5     13.25     491.75 19866.00 57,000
Aug 30 2010:  The 10-20-30 day continues to show that the stock is in a decline. The only positive news here is that the stock appears oversold and has set a new 52 week low several times over the past few trading sessions. RIM has lost 50% of its value in the past 12 months. Last August I was selling Sept 90 Naked Calls on RIM and in June 2009 I was selling July 100 calls. Go through the above trades and you can see the carnage RIM has dumped on shareholders. Imagine buy and holders of this stock. What a disaster. I wouldn't even want to average down on this stock and try to make my way out of it that way. No, the only way to make money on RIM has been for day traders and option traders. The company is definitely in trouble. That said if the stock falls below 48.00, I will be buying back my naked puts, even if there is a loss on the position. I am not interested in holding this stock at any level until RIM can prove that it has bottomed out. RIM continues to make excellent profits, but the perception is that RIM is behind the times now and it is continuing to lose market share in an environment that it use to own. There are more players in the RIM sandbox now and they have been "kicking sand" in RIM's face throughout this year.
Looking at the 10-20-30 averages the warning here is that the stock could move even lower. Meanwhile though I will be closing my Sept 66 calls, but I am reluctant to sell Oct 58 calls for a few more days just to be sure the stock doesn't race back up. That will be the time to sell the naked calls. Today RIm is having a little bounce so I will be buying my naked puts back shortly. The naked calls though will have to wait a few days to see how much the stock bounces.

Sep 9 2010:  COULD RIM FALL TO $38.00 THIS YEAR? RIM continues in a serious decline and news today was again bad, but the stock held on throughout the day. Today analysts have downgraded the stock to $38.00 for the year and expect the stock to continue to see market share erosion and further declines in 2011. However RIMís earnings have remained strong and do not reflect an ďend of the worldĒ scenario just yet. Meanwhile premiums for the call options are decreasing. It would be dangerous at this point to sell naked calls. A serious rally could easily move the stock price back up to $57.00 and I have no interest in owning this stock. I believe the prudent thing to do is to strictly stay with the 10-20-30 rule and only sell the calls after the next rally and when the 10-20-30 shows the stock is moving lower. The same with more naked puts. When the rule shows the stock is turning up, then I will sell naked puts.

Below is a chart of the past 5 years. The stock is challenging its 2008 low which was $44.23 on Dec 3 2008. What is the likelihood that RIM could see $38.00? Looking back at the past 5 years, RIM traded between 38 to 55 from Sept 06 to May 2007 and then the move higher commenced. But RIM was the only player in its market and as subscribers grew the stock split on Aug 15 2007 for 3:1 and then share values moved much higher, probably very overdone by investor enthusiasm. Analysts continued to upgrade RIM even when it was over $140.

Could RIM see the lofty heights of 2008 again?  Things have changed a great deal in a very short period of time. RIM now has major competitors who have very interesting product lineups. They offer many features that RIM does not offer. RIM though has valuable encryption technology which none of the competitors have as of yet. My present view is that I would not want to own this stock. I believe RIM has a much better chance of seeing $38.00 or even lower, than it does $140.00. I will be following the 10-20-30 rule from here on in when selling calls and puts on RIM. 

Sep 17 10 49.90 BTC 5 NP SEP 48 @ .10 -     13.25     (63.25) 19802.75 33000.00
Sep 17 10 47.78 Expiry 5 NC Sep 66 expired                 0.00
Sep 17 10   COMMENTS: At this point I have done very well with RIM but I am putting this trade on hold until I get a better direction as to whether or not RIM can remain a viable candidate for option selling following the 10-20-30 rule. Premiums are decreasing for RIM options when I go further out of the money than a couple of strikes. I'll watch it for now and see what develops.  
Nov 3 10 56.60 STO 6 NC Dec 64 @ .97 1.5     14.50     567.50 20370.25 38400.00
Nov 3 2010: I moved back into RIM today after being out for about a month and a half. I wanted the stock to find a new base, which it did around the 46 - 48 level. From there it has twice tried to rally and each rally has moved higher than the previous, a good sign. Both rallies fell back to the mid-range of the Bollinger band, but did not fall to the low end of the range. The rally was better than 21% and could mean the easy move higher is over for now. Whether or not the stock can rally to $64 by December is somewhat doubtful. I think it is a good strike to sell naked calls at. Meanwhile if the stock rises and can hold in the mid 60's I might consider rolling rather than purchase shares. RIM is a tough call and I think the chance of it regaining loftier heights is limited. Nonetheless, stocks can surprise you and RIM being so oversold may have more upside. Remember that at 56.67 it is only trading at 10.37X earnings. This stock could very well surprise to the upside.

Nov 9 10 55.40 STO 5 Naked Puts Dec $50.00 @ 1.07 2.1%     13.25     521.75 20892.00 63,400.00
Nov 9 2010: The stock has been moving up and now this sideways pattern is emerging. However the 10 day is widening from the 20 and 30 which would indicate that there is still more upside to come. I am selling naked puts today with the move down by $1.30.

Dec 17 10 60.69 Expiry: 5 Naked Puts Dec 50 Expired
6 Naked Calls Dec 64 expired
                0.00
Dec 17 2010: The 10 day has definitely turned and even with today's up swing, the trend is down. The stock opened at a high of $62.50 and then fell throughout the day to close almost on the low. I sold naked calls today.

Dec 17 10 61.50 STO 5 Naked Calls Jan 64 @ 1.45 2.2%     13.25     711.75 21603.75 32,000.00

End of 2010 - Income $12,533.25 = 39%

STRATEGY SUMMARY: This year the returns were terrific. At one point the stock became less volatile making the option premiums poor, but this was short lived. A gain of 39% in one year gives me a lot of confidence that the 10-20-30 moving averages strategy holds merit for my trades. While I realize that I cannot just blindly rely on the 10-20-30 strategy, it was obvious this year that moving averages assisted greatly in my knowing when to sell and buy my option positions.

RIM TRADES BY YEARS
VIEW RIM-2011 TRADES
VIEW RIM-2010 TRADES
VIEW RIM-2009 TRADES

 

 

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