Investors should purchase Research In Motion Ltd. put options because “negative catalysts” may hurt the BlackBerry maker’s stock price, Goldman Sachs Group Inc. said.
Derivatives strategists Katherine Fogertey and John Marshall recommended buying RIM’s September $60 puts while selling September $52.50 puts, a strategy known as a spread. Fogertey and Marshall cited analyst Simona Jankowski, who is “bearish,” according to the note, and rates the Waterloo, Ontario-based company a “sell.”
Sentiment before RIM’s fourth-quarter earnings report on March 24 is “too positive,” and RIM’s tablet, which Goldman expects to be introduced in mid-April, may not succeed in the competition against Apple Inc.’s iPad, the note said. The iPhone 5, which is expected to be introduced in July, “could again raise concerns around the competitive landscape,” it said. RIM dropped 2.1 percent to $59.84.
RIM will report fourth-quarter profit of $1.75 a share excluding some items, according to the average of 48 analysts’ estimates in a Bloomberg survey. It has dropped 14 percent since its nine-month high on Feb. 18. RIM’s implied volatility, the key gauge of options prices, for at-the-money contracts expiring in 30 days rose to 54.22, the highest since November, from 28.57 on Feb. 3.
Goldman last month recommended buying RIM’s April $60 puts and April $65 calls ahead of the company’s PlayBook tablet introduction because possible volatility around the launch was not being adequately priced in, it 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.