Strategy bets IBM will return to highs
Chris McKhann | [email protected]
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.