International Business Machines Corporation (IBM) is technology company that operates five different business segments around the world. IBM stock is currently trading around $164.50 in a 52 week range of $149.52-$196.86. The stock has been relatively sideways this year with shares rallying around 2.5% year to date. IBM is set to report their most recent quarterly earnings today and stock is trading higher ahead of that release despite IBM stock’s dismal historical performance on earnings day.
IBM has sold off on earnings day 9 of the past 12 quarters and has sold off from earnings day to options expiry 10 times in the past 12 quarters. The stock is trading above the cloud on the daily chart but is above a sideways future cloud. On average the stock moves around 3.7% on earning day but ahead of this report market makers are implying a move of around $6.00 (3.6%). With that implied move we can calculate a downside target of $158.50. With such a weak historical performance record I can only look to get short IBM into earnings.
Possible trade: Buying the IBM Apr 24th Weekly 160-157.5 Put Spreads for $0.55
Risk: $55 per 1 lot
Reward: $195 per 1 lot
This trade offers a trader nearly 4-1 on their money and has a breakeven above the implied downside target.