Chart 2 – January 2016 reflects significant uncertainty over share price – note the one-sided Probability Distribution at sharply lower prices
However, the bell curve looks strange by the time you get to January 2015. And even stranger by the time you get to January 2016 (see Chart 2). Considering the almost evens-odds of settling at $10.00 or below by June, the January 2016 expiration implies a higher chance of a lower share price at that time. According to the IB Probability Lab the chance that Blackberry shares will close below $9.00 in two years’ time is 57%. And investors’ defensive stance in the options market suggests a 38% chance its shares will close below $6.00 at that time, which is roughly the odds the market assigns to closing below $9.00 per share by June 2014. Clearly such pricing meshes with Mr. Chen’s “50-50” assessment causing buyers of protective options to assign higher prices to lower strike puts.
It will likely take more time before bearish analysts have a change of heart over the prospects for Blackberry. The first step on that journey is a management strategic change – already underway. Judging by the recent rise in shares of Blackberry, there are some who strongly disagree that Blackberry can be written off. Clearly the market for longer-dated options expirations has strong reservations about the outlook for Blackberry. That market might prove more fruitful for option traders less bearish on the prospects for Blackberry than the regular market for its shares.