(This is an excerpt from an article I originally published on Seeking Alpha. Click here to read the entire piece. I have updated price and trading information to reflect time of publishing)
While announcing disappointing earnings guidance again, RIMM indicated it will launch another repurchase program as early as July 10, 2011, the first day it can get back into the market. With shares dropping 22% right now, RIMM is likely to get its biggest deal yet. At $27.65, the stock is trading at near 5-year lows and well below the price points from the previous two repurchase programs.
{snip}
My attempt to optimistically spin RIMM’s judgment day ended up being the exact wrong call. Those who bought puts instead of calls end up with the large payout. I have recycled my own puts once again (a third time of locking in profits on puts and using a portion to buy replacement puts at lower strikes) and continuing to hold shares in anticipation of another floor created by RIMM’s repurchase activity. Amazingly enough, those puts quickly doubled after purchase, and I am considering yet one more round of recycling.
{snip}
…it is clear that if RIMM’s late product roll-outs and cost realignment do not produce quick results, the company will find itself recording large losses again on repurchased shares.
{snip}
Be careful out there!
(This is an excerpt from an article I originally published on Seeking Alpha. Click here to read the entire piece. I have updated price and trading information to reflect time of publishing)
Full disclosure: long RIMM shares, puts, and calls