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Bullish Trends: Rolling, Rolling, Rolling

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Finally, Research In Motion (RIMM) is around $8.40 and interesting trading activity surfaced on the Blackberry-maker yesterday when a November - December 7 call spread traded for $0.34, 18300X, and again for $0.24, 14500X (roughly). 40,164 November 7 calls traded on the stock yesterday and the activity probably offset positions opened before the October expiration, when blocks traded for prices ranging from $1.15 to $1.20. The stock is up almost 5% since that time and the position is being closed at $1.43. They are closing the position rather than exercising the in-the-money contract and buying (calling) a hefty amount of RIMM shares at expiration. New positions now being opened in December 7 calls for $1.67., which traded 35,228 contracts on the day. With 43,326 contracts in open interest, the December 7 call is now the largest open interest position in RIM options.

If you track order flow to find trading ideas, the rolling of large blocks of options is interesting. In two of the three examples (MRO and RIMM), the investor is banking a profit on the November contracts. The FXI November call position was a winner until the volatile sell-off across global equity markets seen last week. Moreover, by opening positions in December, these big traders seem to be expressing confidence that the bullish trends in the underlying shares will continue over the next five and a half weeks.

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At the time of publication, Henry Schwartz held no positions in the stocks or issues mentioned.

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