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Is RIMM a Pin?


With volume ballooning, stock definitely remains one to watch.

There's a perpetual urge to declare any stock near strike a "pin."

With Research in Motion (RIMM) near 40, is it a good candidate?

Remember: There are certain characteristics that make something more likely to pin than not. In no particular order, we have the volatility of the name in question, the overall market volatility, the trend in both volatilities, the open interest on the line in question relative to typical volume in the name, and the degree to which that open interest is recent and held by likely delta hedgers (market makers and specialists).

In English, in order to expect RIMM to pin, we'd like a relatively non-volatile market, a relatively non-volatile RIMM with high open interest relative to daily volume, and a trading crowd to own that open interest - preferably calls, and preferably bought in bulk this week.

Are these factors in place? Maybe.

Volatility had tapered off a bit recently in both RIMM and the market. That suggests yes. Open interest is okay: It's 25,000 calls and 23,000 puts vs. about 15-20 million shares per day.

As the graph below shows, volume was fairly unexceptional in RIMM options all week. All month, really - until Wednesday, when it ballooned, particularly on the March 40 line.

So I'm going to call this one to watch. I'm not sold on this expiration being a great pin bonanza, as the bulls have certainly squeezed the call shorts the last couple weeks.

But RIMM looks as likely as anything to be one.

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No positions in stocks mentioned.
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