Pre-Earnings Bears Ante Up on IBM

IBM Corp. (IBM) has traditionally struggled in the aftermath of its earnings reports

by Digital Content Group

Published on Jan 20, 2015 at 2:25 PM
Updated on Jun 24, 2020 at 10:16 AM

IBM Corp. (NYSE:IBM) is sitting 1.8% lower this afternoon at $154.34, and is scheduled to report fourth-quarter earnings in less than two hours. Ahead of this event, options trading is running at roughly 1.4 times the usual intraday pace, while the stock's 30-day at-the-money implied volatility has popped 3.5% to 26% -- signaling elevated demand for short-term strikes.

IBM's most active option is the weekly 1/23 155-strike put, which is seeing buy-to-open activity. By purchasing these positions, the speculators are wagering on additional downside through this Friday's closing bell -- when the weekly series expires.

Looking back, however, IBM hasn't ended a week south of $155 since early 2011. As such, delta on the now in-the-money put is negative 0.51, meaning the options market is giving the contract about a 1-in-2 chance of being in the money Friday night.

As alluded to earlier, IBM will deliver quarterly results this evening, and this could be a boon for today's option bears. Over the last eight quarters, the shares have averaged a single-session post-earnings loss of 2.8%, including a 7.1% dive last October.

Taking a step back, today's penchant for short-term puts is just business as usual for IBM Corp. (NYSE:IBM). The stock's Schaeffer's put/call open interest ratio (SOIR) of 1.03 ranks in the 74th percentile of its annual range.

Weekly Chart of IBM since January 2011


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