Friday, January 18, 2013

The dilemma of RIM short sellers

If you follow Research In Motion you already know that the percentage of RIM stock held short has been wildly in motion. Depending on what you read, anywhere from 17% to 25% to one third of the RIM share float is tied up in short positions.

That's an awful lot of folks who will want to cover their asses as we get closer to the BB10 debut. As the linked article states, a lot of the current activity in the stock could well be from nervous shorts covering their positions.

As the share price approaches $20 it's got a lot of happy-ever-after built into it. Folks who were going short at ten bucks are screwed, but there is an argument to be made to short the stock in the twenty dollar range. BB 10 is obviously the make or break hinge here. If that debut meets a luke-warm reception then shorting in the next couple of weeks will pay off.

If the BB 10 buzz continues to build and is followed up by a reasonable product, then shorting now will cause you to lose your shorts.

Best strategy?  If you foolishly ignored my advice to buy at 6 and change, or even ten and change last May, and you are contemplating a short position at today's price, balance that off with call options that will limit your losses just in case.

There's a reasonable amount of speculative upside over the next couple of weeks, so if you've got the nerve, get in at 16 and get out at 18 or 20 in the next week or ten days.

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