04/19/2013

Selling a Put on Iconic IBM

Selling a Put on Iconic IBM

By Paul Price

IBM:  Today’s 8% selloff does not compute.

SPOCK

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.

[Click on images to enlarge]

IBM put prices

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.

   IBM 1-year chart                    

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. 

 

Apr 19, 2013 12:00:00 AM | Newsletter Articles, Options, Value Investing

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I'm editor at Phil's Stock World, and editor for Stock World Weekly. My background is in the biological sciences, and law. After a brief career in the legal field, I changed directions and am now working as an editor, and very much enjoying my experiences in the editing world.

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