Investors should buy Research in Motion Ltd. options before the company introduces its PlayBook tablet because possible volatility around the launch is not being adequately priced in, Goldman Sachs Group Inc. said.
Equity derivatives strategists John Marshall and Maria Grant recommended buying RIM’s April $60 puts and April $65 calls, a strategy known as a strangle. Waterloo, Ontario-based RIM fell less than 0.1 percent to $63.57 today in New York.
“Options do not appear to be factoring in the potential for an increase in volatility around the upcoming tablet launch,” the strategists wrote in a note today. “Success at the enterprise level will be closely monitored, and we’d expect a strong or weak sell through to be stock moving.”
RIM, whose BlackBerry smartphones are losing market share to Apple Inc.’s iPhone, is developing the PlayBook to bring in a new source of revenue and bolster growth. The tablet is scheduled to come out this quarter. Research firm IDC predicted tablet-computer sales will almost triple to 44.6 million units this year. Apple sold 14.8 million iPads since the tablet was introduced in April.
Marshall and Grant said RIM’s earnings report on March 24 should be an “important catalyst” for the shares. The BlackBerry maker moved an average of 9 percent on earnings over the past eight quarters, the note said. RIM will post a fourth- quarter profit of $1.75 a share excluding some items, according to the average of 49 estimates in a Bloomberg survey.
The trade will profit if RIM closes above $70.51 or below $54.49 at expiration on April 15, the note said.
Calls give the right to buy 100 shares of a security for a certain amount, the strike price, by a set date. Puts convey the right to sell. Investors use options to guard against fluctuations in the price of securities they own, speculate on share-price moves or bet that volatility, or stock swings, will rise or fall.
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