Making a small adjustment on IBM position before earnings tonight after close. Currently, we have bullish risk reversal trade - short July 120/125 bull put spread and long July $140 calls.
For last three days, the IV has been slowly moving higher. The stock is trading at $131 and front month May $140 calls are going for $0.65. I want to sell these calls.
- Sell to open May $140 calls for $0.65 credit.
The converts the whole trade into July 120/125 bull put spread for $1.20 credit and July/May $140 calendar for net cost of $0.90 debit. I believe the stock will have positive reaction after earnings, and unless the stock makes a monster move, May $140 calls are likely to give back some tomorrow, so it is better to sell them now.
Good luck!
About Me
- Fahad Khalid
- Chicago, IL, United States
- I have Masters in Business (Accounting and Finance 2003) from Michigan State University. I have been trading the market since 1998. Prior to picking up trading as a full-time career in 2008, I was a management consultant at Alvarez & Marsal and Conway MacKenzie for four years. I provided turnaround, crisis management and restructuring services to financially distressed firms. Prior to working in turnaround, I worked in Audit & Assurance at Deloitte & Touche for two years. Trading in the market has always remained my side business ever since I started college. 90% of the time, I trade through options. I love volatility skews and positive Theta plays. While I make a lot of directional bets, in general my favorites are to take advantage of high implied volatilities through calendar or butterfly spreads and vertical credit spreads. I never buy straight calls or puts and I do a lot of exotic multi-leg option trades.
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