IBM Analysis

International Business Machines Corp. (IBM)

Update 7/24/2017: IBM gapped downward after earnings were published and continued its decline for the next three days. I exited as expiration approached.

Shares declined by 4.7% over 10 days, or a -172% annual rate. The options position produced a 32.7% loss on debit for a -1,194% annual rate.

IBM publishes earnings on Tuesday after the closing bell.

I shall use options that trade for the last time 10 days later, on July 28.

Implied volatility stands at 24%, which is 2.4 times the VIX, a measure of the volatility of the S&P 500 index.

IBM’s IV stands in the 67th percentile of its annual range and the 90th percentile of its most recent broad movement.

The price used for analysis was $153.96.

Premium: $5.33 Expire OTM  
IBM-iron fly Strike Odds Delta
Long 165.00 91.4% 9
Break-even 160.33
Short 155.00 56.9 45
Short 155.00 42.7% 55
Break-even 150.33
Long 145.00 82.0% 16

The premium is 53% of the width of the position’s wings.

The risk/reward ratio is 0.9:1.

Decision for My Account

I have entered an order on IBM as described above. The stock at the time of entry was priced at $153.99.

By Tim Bovee, Portland, Oregon, July 14, 2017


Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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