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Why BlackBerry Stock Popped Today

By Rich Smith - Mar 12, 2021 at 7:12PM

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Earnings are on the horizon, and traders are placing their bets.

What happened

Shares of BlackBerry Limited (BB 1.02%) -- the one-time smartphone maker, now security software specialist -- climbed steadily throughout the trading day Friday, ultimately ending with a 10.8% gain by the closing bell.

So what

There doesn't appear to be any obvious news behind the stock's rally today, except for one thing: According to data from TheFly.com, options activity was unusually bullish in BlackBerry trading today, with 20% more call options being purchased than usual. This is a bullish signal because the buying of "calls" permits a contract buyer to force a contract seller to sell the stock at a certain price up to a set time in the future.

Options traders buy calls, of course, when they expect a stock to go up -- the idea being to gain the right to purchase shares at a price below where the stock's market price ends up. In the case of BlackBerry, the ratio of calls to puts (options that confer the right to sell the stock at a set price -- a bearish bet) trading today was 10-to-1 -- and that seems very bullish indeed, or at least shows great optimism on the part of options traders.

A glowing green line climbs on a digital stock chart.

Image source: Getty Images.

Now what

What has those traders so excited? Well, BlackBerry is expected to report its fourth-quarter earnings on March 31. Analysts have the stock pegged for only $0.03 per share in earnings for the quarter, for a 67% decline year over year, and a 15% decline in sales (projected to be $246.4 million).

If either of those numbers turns out to be less bad than anticipated -- or if BlackBerry even just gives good guidance for the quarter coming up (when analysts expect to see earnings per share of only $0.01), then the folks buying BlackBerry options today could turn a tidy profit a couple of weeks from now.

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