Adam Warner at Daily Options Report discusses Pinning RIMM.
RIMM Pin?
So there’s a perpetual urge to declare any stock near strike a "pin". RIMM near 40, is that a good candidate?
Well 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, we’d like a relatively non-volatile RIMM with high open interest relative to daily volume. And we’d like the trading crowd to own that open interest, preferable calls and preferable bought in bulk this week.
Are these factors in place? Maybe.
Volatility had tapered a bit recently in both RIMM and the market until The Fed. That suggests yes. Open interest is OK, 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. And really all month. 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 any to one that does.
….And just want to add all the usual caveats that pinning is just a force on the margins. Actual market or company specific news will more than trump pin forces.
