Research in Motion (RIMM, $97.53, up $0.82) reported earnings after the bell and they weren’t pretty. Wall Street was eager to hear the news but punished the stock in after-hours trading when the company missed earnings by a penny. I mentioned on Monday that analysts were looking for revenues of $2.6 billion and earnings-per-share of $0.87. RIMM also missed revenues by $20 million.

We also talked about RIMM’s September numbers which were a little funny but this could have been because consumers are waiting for the arrival of the company’s new Bold smartphone. The company said new subscriptions were 2.6 million, which matched expectations but new devices sold only reached 6.1 million, not the 6.3 million Wall Street was expecting. So maybe consumers were/ are holding out or just buying the iPhone instead.

In after-hours trading as I write this, RIMM is down $18.88 to $78.65. Yikes. I was hesitant to recommend another strangle option trade on RIMM because I thought we would only see a 10% move in the stock either way. We had used the October 120 calls (RULJD, $1.20, down $0.36) and the October 80 puts (RFYVP, $2.06, down $0.54) as a strangle on September 16 and closed both sides of the trade within a week. We made a gain of 40% with that trade. The after-hours drop of 20% for RIMM should hold up to make this trade profitable if you put this strategy on before earnings.

Rick Rouse
Rick@OptionsMentoring.com

Research in Motion (RIMM, $100.90, down $6.05) is trading lower after opening the morning at $111. The volatility has picked up over the past few weeks after the stock made a run from $119 to $135. At the end of July, I mentioned that the company had three new phone models coming out: the BlackBerry Bold, the Kickstart and the Thunder which could move the shares higher.

Over the next couple of weeks the September 140 calls (RULIH, $0.04, down $0.01) went from $1.85 to $5.00 which netted us over a 150% return. I had mentioned that the stock faced serious resistance at $140 and we closed the trade. As you can see, with RIMM’s 35 point drop since our exit on August 8, these calls are now pretty much worthless.

The decline in the share price ahead of these new phones has given us another opportunity to go long. However, we may have to use some protection on the downside to mitigate some of the risk.

The good news is that the company sold 5.6 million smartphones from April through June, which was up from 2.5 million a year ago. This shows that RIMM is capturing more and more market share. For what it’s worth, the stock also got an upgrade this morning out of Morgan Keegan to “Outperform” from “Market Perform”.

I could care less about the upgrade but I do think RIMM is at the point of bouncing higher or breaking serious technical levels. The stock is right at its 200-day moving average and if it falls below $100, there’s a real chance the stock could dip into the $80’s. For this reason we will use some put options to hedge our bets. The September options expire in a few weeks so we will want to use the October options.

The October 120 calls (RULJD, $3.22, down $1.38) traded as high as $6.10 when the stock hit $111 earlier this morning and the October 80 puts (RFYVP, $1.82, up $0.62) hit a low of $1.37 in the process. We will do a two-for-one trade at current levels. This means for every two call options you buy, also buy one put option. If the stock can rebound and trade higher, the loss in the puts will be offset by the gains in the call options. Either way, I think RIMM will easily make another 20 point move higher or lower.

Rick Rouse
Rick@OptionsMentoring.com

Research In Motion (RIMM, $132.14, up $4.89) is having another huge day after touching a low of $116 on Monday. The move can be attributed to a positive note out of Citigroup saying the company is poised for a strong second half of the year with the introduction of the BlackBerry Bold.

On July 31 I mentioned the company’s other products, the Kickstart and the Thunder, will also be hitting the market. These catalysts have propelled the stock higher in the short-term and that was all were we looking for. I profiled the September 140 calls (RULIH, $5.00, up $1.45) at $1.85 and they are up another 40% today. Some of you were stopped out with only an 8% gain but other traders may have stayed in.

The calls are now up 150% from entry levels and with the weekend coming up it would be wise to maybe sell half of the position and set a stop on the other half. There will be a small loss of time premium but that would be offset if RIMM continues higher next week. As far as resistance, the stock is facing headwinds at $140 and it would be a stretch for RIMM to barrel through that and go on to test its 52-week high of $148.

Rick Rouse
Rick@OptionsMentoring.com