By Paul Price
IBM: Today’s 8% selloff does not compute.
I’m using the $16.68 per share drop in IBM’s shares as a chance to sell a January 2014 $190 put for $13.80 per share. We’re adding one put contract to our Virtual Put Selling Portfolio and thereby collecting $1,380 in cash.
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Our commitment is to buy 100 shares of IBM at a net cost of $176.20 (the $190 strike price – the $13.80 put premium) if the shares finish below $190 on Jan. 17, 2014. The break-even price is even lower than IBM's 52-week low.
If you don’t believe that IBM stands for I’ve Been Mugged this looks like a good trade.
Maximum profit = $1,380 if the put expires worthless next January. Maximum risk is to end up owning IBM at $176.20 per share.
See the entire Virtual Put Selling portfolio by clicking here.