RIMM Rocker?

For those of you who happened to catch "Options Action" on Friday, and you know who you are, we had by our own lofty standards, some pretty good calls. We warned about the decline in material and transport names, suggesting defensive trades for both. But it's our trade on Blackberry maker RIMM that still remains actionable.

The company is set to report after the bell on Thursday. And while earnings and top-line growth will grab the headlines, margins and shipment totals could move the stock.

"If RIMM comes in on the high end of shipments estimates, and margins stay above 44%, the stock should trade up," said CIBC's Todd Coupland, who rates the stock 'Sector Outperform' with a $90 price target.

"Last quarter, the company guided higher on gross margins, and that 44% mark is sort of the line in the sand that could drive the stock one way or the other," Coupland added.

In terms of number of handsets sold, some industry watchers say Blackberry appears poised to post a solid number.

"The back channel checks have been strong," noted Needam's Charles Wolf, who pointed out that RIMM stands to benefit from Verizon's aggressive promotion of the product.

Having said all that, cynics might suggest the good news is already baked into the stock. RIMM shares have doubled in the past three months, leaving rival Apple far behind.

On Friday's show, Dan Nathan, Chief Options Strategist at Phoenix Partners Groupand a cable news sensation of unrivaled proportions, suggested a bearish trade for those looking to protect against their RIMM stock. He offered up what's called a put spread collar, where an investor sells an out-of-the-money call to finance the purchase of a put spread. Specifically, Nathan sold the June 90 call for $2.10 to buy the June 80/70 put spread for $2.60, for a total cost of $0.50. That call has lost value since the trade was suggested, and the put spread has become more valuable as the stock has traded lower. Today, you could sell the same call for $1.62 and buy that June 80/70 put spread for about $3.15, for a total cost of $1.53. If you put this trade on today , you're offered 9% upside while still getting protection down below $78.5 and until $70, or 10% of the underlying current price.

"With competition from Palm and Apple showing no signs of slowing, RIMM may need to price aggressively this summer to maintain their market share," said Nathan.

Or in other words, margins may be on the low end of that line in the sand, making a little cheap protection ahead of earnings slightly more attractive.

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  • Melissa Lee

    Melissa Lee is the host of CNBC's “Fast Money” and “Options Action.”

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