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BookingAlpha Option Trading Advisory

Friday, December 17, 2010

Butterfly play on IBM

IBM just doesn't want to move.
If you take a look at its chart you will notice how IBM has been trapped in the 141 - 147 range for the last month and a half.

(Click on Image to enlarge)

I want to speculate on this, and my bet is that IBM will be inside a similar range by January 22.

Here is my idea:

Buy 1 Jan 140 PUT @1.37 (-$137)
Sell 2 Jan 145 PUT @3.05 (+$610)
Buy 1 Jan 150 PUT @6.00 (-$600)

PROFIT RANGE : IBM stays between 141.27 and 148.72 by January 22.

(Click on image to enlarge)

See how this trade played out some days later

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