RIMM Reports Earnings: Profit Either Way With Straddles

RIM reports earnings tomorrow. Average analyst estimates are $1.00/share in EPS and $3.62B in revenue. Forty-one analysts track the stock with five upward EPS revisions in the last 30 days and no downward EPS revisions in the last 30 days. Last quarter, RIM beat average analysts expectations by .04/share or 4.3%, .98/share vs. .94/share.

The company has been issuing many positive press releases, but with the state of the economy, it is difficult to assess whether the good string of results can continue, or for how much longer. So, this is another good opportunity for options straddles, partcularly with 23 days left to expiration. A lot will happen until then (besides, it will be October!).

Below are straddles (strangles) to profit from any surprises on the annouccement. The figure shows the maximum moves required to profitability, and the optimum position sizing.

The current max. move is 13%. However, given the time to expiry, the actual move required will be much smaller.

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