Ring the Register on RIMM

Research In Motion (RIMM - commentary - Cramer's Take) is slated to report earnings after the bell today. Estimates call for profits of 62 cents a share, about double from the year-ago period. The implied volatility of its options market shows expectations of a 10%, or $11, price move. But remember, IV is based on magnitude, not direction, so that $10 move being priced in could be up or down.

In this case, there seems to have been some caution. In recent days, there has been a build in put open interest. Before I get to how this percentage move is derived or share any trade ideas, I should disclose that I established a bullish position for the Options Alerts model portfolio on Tuesday, when the stock dipped below $100 a share.

I didn't want a pure earnings play, so I used a strategy with a longer-term expiration date. I really don't like to play earnings because I have no idea how what the numbers will be or how investors will react, and there's always the wild card of how steep a drop in implied volatility will occur following the earnings release.

Some of my for reasoning for turning bullish is that the love affair with Research In Motion seems to have passed, as its shares have declined some 27% since it hit its 52-week high of $137 on Nov. 7 and now are sitting around the $104 level. The breach of the $100 level on Tuesday was certainly a negative, but I'm more focused on the fact the stock is now in the process of filling the gap at $97, which represents support. The stock price has become oversold and sentiment has become overly negative. Money managers still need to find ways to salvage what has been a dismal year and RIM is one of the few momentum names that can deliver earnings growth that will translate into a year-end run-up in price.

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Steven Smith writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He was a seatholding member of the Chicago Board of Trade (CBOT) and the Chicago Board Options Exchange (CBOE) from May 1989 to August 1995. During that six-year period, he traded multiple markets for his own personal account and acted as an executing broker for third-party accounts. He appreciates your feedback; click here to send him an email.

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