CNBC's Jim Cramer thinks Research In Motion Ltd. (NASDAQ: RIMM) is poised for a big holiday season. He also says the fundamentals on RIMM are impressive. Cramer suggests buying calls in the money by $10, but we like selling puts even farther in the money instead. This way, profits are locked in if the stock rises, stays flat, or even drops a little. If you are inclined to agree, then it could be a good time to get into a bullish hedged trade on RIMM.After hitting a one-year high of $137.01 earlier this month, the stock has fallen off a bit since then. RIMM opened this morning at $121.17 and has hit a low of $120.60 and a high of $123.23. As of 11:25, RIMM is trading at $122.95, up $1.60 (1.3%). The chart for RIMM looks bullish but deteriorating, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
If you agree with Cramer, then for a bullish hedged play on this stock, I would consider a December bull-put credit spread below the $90 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. This particular trade will make a 4.2% return in just 3 weeks as long as RIMM is above $90 at December expiration. Research In Motion would have to fall by more than 26% before we would start to lose money.
RIMM hasn't been below $90 since September and has shown support around $104 recently. This trade could be risky if Christmas sales of Blackberries are unimpressive, but even if that happens, this stock could be protected by strong support RIMM found just above $100 earlier this month.
Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in RIMM.
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