Research in Motion (RIMM) missed the earnings estimated by the Street. Its shares fell instantly over 10% after hours on Thu when it made the announcement. But Fri RIMM not only recouped all the decline overnight but ended up jumping over 7%. Why? Because its CEO said they are considering strategic options. This is the Wall Street jargon, meaning it is considering selling itself. Investors liked the idea and pushed its shares up. While it is too early to be sure about anything, I'm not surprised about this news as I had talked about this possibility months ago. I think sooner or later RIMM will have to go this way.
I think there is a cheap way to speculate on this. Let's say we give them 10 months to materialize this idea and let's also bet that if this really happens, its price is likely at least worth between $20-25. If you think this is reasonable, you can set up a call spread: e.g. buy Jan 2013 $20 call options and sell Jan 2013 $25 call options at the same time. Your total cost will be only about $0.80 per share. So one contract (=100 shares) will only cost you $80 or $800 for 10 contracts (1000 shares). That is your maximal loss if nothing happens by Jan 2013. If RIMM really get sold and its shares jump to $25, you can earn up to $4200 (minus small commission fees) if you bet for 10 contracts. This is 5:1 benefit/risk ratio. I like the idea and will consider to make it.
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