International Business Machines Corp. (IBM)
Update 5/15/2017: IBM gapped down sharply immediately after earnings were published and did it again 12 trading days later, placing the position squarely in the loss territory. As expiration approached I exited for a $14.93 debit.
Shares declined by 11.4% over 27 days, or a -154% annual rate. The options position produced a 52.2% loss on debit for a -706% annual rate.
IBM publishes earnings on Tuesday after the closing bell.
I shall use the MAY series of options, which trades for the last time 31 days hence, on May 19.
Implied volatility stands at 21%, which is 1.5 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 96th percentile of its most recent broad movement.
The price used for analysis was $171.14.
The premium is 48% of the width of the position’s wings.
The risk/reward ratio is 1.1:1.
Decision for My Account
I have entered a position on IBM as described above. The stock at the time of entry was priced at $171.22.
By Tim Bovee, Portland, Oregon, April 18, 2017