IBM Analysis

International Business Machines Corp. (IBM)

Update 2/7/2017: IBM goes ex-dividend on Feb. 8 and I exited for a loss to avoid the chance of assignment. The share price rose sharply after earnings were published, pushing the price beyond the profitable zone for my iron fly options spreads.

Shares rose by 7.1% over 19 days, or a +136% annual rate. The options position produced a 27.1% loss on debit for a -520% annual rate.


 

IBM publishes earnings today after the closing bell.

I shall use the MAR series of options, which trades for the last time 57 days hence, on March 17.

Implied volatility stands at 23%, which is 1.8 times the VIX, a measure of the volatility of the S&P 500 index.

IBM’s IV stands in the 46th percentile of its annual range and the 63rd percentile of its most recent broad movement.

The price used for analysis was $167.22.

Premium: $8.45 MAR iron fly
IBM   Odds Delta
Calls
Long 180.00 88.7% 13
Break-even 173.45
Short 165.00 47.2% 56
Puts
Short 165.00 52.5% 44
Break-even 156.55
Long 150.00 86.0% 12

The premium is 57% of the width of the position’s wings.

The risk/reward ratio is 0.8:1.

Decision for My Account

I have entered a position on IBM as described above. The stock at the time of entry was priced at $166.82..

By Tim Bovee, Portland, Oregon, Jan. 19, 2017

2 thoughts on “IBM Analysis

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