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RIMM Earnings Shocker? Options Traders Think So

While equity investors long ago discarded RIMM to the unmarked grave of failed tech companies (see Palm, Nokia), options traders see opportunity.

Today, nearly 18,000 of the weekly June 10-strike calls have traded hands at an average price of fifteen cents, a bet that isn’t profitable unless RIMM closes above $10.15 by tomorrow.

So what’s behind the optimism?

I suspect it has little to do with the earnings. After all, investors no longer care about earnings. This is now a sum of the parts story. RIMM has lost too many battles, and now they are about to lose the war.

But the company has recently hired bankers, and if they are able to put a plan in place to monetize their patent portfolio, offload their hardware production, figure ways to stem the loss of users and continue to license their software, maybe the stock is cheap.

RIMM has an enterprise value of less than $3b ($1.7bil in net cash, no debt, and a $4.7b market cap) with expected sales of about $12.5b in this fiscal year. Someone should be able to make use of their patents, users and market share, even though they all seem to be getting weaker by the day.

The consummate contrarian in me wants to play tonight’s earnings from the long side. The options market is implying about a 9% move, which is well shy of the four quarter average of about 14.5%.

Yesterday, as a play on earnings, I bought those same June weekly 10-strike calls for $0.15. It’s not a huge amount of premium, and I do need a big move this afternoon to make money on the trade. But with short interest ticking up to close to 20%, and sentiment so overwhelmingly bad, a little bit of good news could cause a big rally in the stock.

Just two hours before earnings, other seems to agree with me: those calls today are the most actively traded options line in the name today. Track RIMM here.

- Dan Nathan is a contributor to CNBC's "Options Action" and he is the Options Strategist at FGC Securities. Dan is also the Editor and Co-Founder of RiskReversal.com a website dedicated to providing unique insight and proprietary option trading ideas for equity, index and etf traders.

Watch Options Actionon CNBC Fridays 5:00pm ET, Saturdays at 6a ET and on Sundays at 6a ET

Questions, comments send them to us at: optionsaction@cnbc.com

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