IBM Options Trader Nails Stock Pop

Call buying had been popular on IBM even before today

Josh Selway
Aug 3, 2018 at 2:20 PM
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IBM Corp (NYSE:IBM) is trading 3.2% higher at $147.55, making it the best Dow stock today, with Trade-Alert mentioning chatter out of the activist investor community. Regardless for the reason, it would seem one IBM options trader managed to place a well-time options bet ahead of the equity's surge this morning.

Shortly after the open, buy-to-open activity was detected at the weekly 8/3 145-strike call, with 1,070 contracts crossing at an ask price of $0.25, with the stock trading at $144.22. The ask price on those same calls is now $2.05, as the shares hold near session highs.

There had been heavy call buying on the blue chip coming into today, too, based on its 10-day call/put volume ratio of 2.66 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This reading ranks in the 86th annual percentile, confirming such a preference for calls is unusual.

As you can see in the chart below, IBM has been stuck in a downtrend since its January highs. Overall, the security is down 3.8% year-to-date to test its year-over-year breakeven point. Analyst price-target cuts could begin to roll in should the underperformance continue. The current average 12-month price target for the stock is $165.11, an almost 12% premium to current levels. Not to mention, Big Blue historically struggles in August.

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