Options Trading News

January 9, 2013  Wed 11:16 AM CT

A large call spread leads today's option action in IBM.

Total option volume in IBM is more than 24,000 contracts so far today, already twice its daily average in the last month. Much of that action is in a single call spread.  

A trader bought 6,000 February 205 calls for $0.50 and sold the same number of the January 205 calls for $0.39. These are both weekly options, using the contracts that expire in 16 and 23 days respectively. The volume at each strike was well above previous open interest, so this is a new calendar spread.

The call spread costs the trader just $0.11, which is all that is at risk until the first expiration. The maximum profit would come if IBM is right around $205 at that first expiration. (See our Education section)

IBM is down fractionally this afternoon at $192.76, in the middle of its recent range. The computing giant hasn't been above $205 since mid-October, when shares hit their 52-week high.
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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