NEW DIRECTIONAL PUT PLAYS
Intl. Bus. Mach. - IBM - close: 125.66 change: +0.13 stop: 134.05
Why We Like It:
CSCO's earnings results were impressive. I think this news sends technology stocks higher on Thursday but traders are likely to sell the news and wait for the jobs number on Friday morning. Therefore I'm suggesting we use a bounce in IBM tomorrow as an entry point to buy puts. The stock has broken several layers of support and looks poised to correct toward the 200-dma. If we can catch a bounce near its 50-dma or the $130 level it would be an attractive entry point.
I'm suggesting we open put positions in the $128.50-130.00 zone. We'll use a stop loss at $134.05. More conservative traders may want to consider a tighter stop loss. If triggered at $128.50 our first target is $122.50. Our second target is the 200-dma.
This should be a very short-term trade so I'm listing the February puts, which expire in less than three weeks. More conservative traders may want to use March puts. I'm suggesting the $125 put.
BUY PUT FEB 125 IBM1020N125 open interest=14,693 current ask $1.87
Entry on February xx at $ xx.xx <-- TRIGGER @ 128.50
Change since picked: + 0.00
Earnings Date 04/20/10 (unconfirmed)
Average Daily Volume = 8.2 million
Listed on February 03, 2010