IBM has been making some seriously crazy moves lately and we seem to be getting a second chance to get out of our bearish fly. To recap, we placed a trade on IBM and were initially right but then watched as the stock launched through resistance and made our Fly look like it could be a total loss. Here’s the structure:
TRADE: IBM ($186.75) Buy the Apr4th 190/180/170 Put Fly for $3.20
– Buy 1 Apr4th 190 Put for $4.95
– Sell 2 Apr4th 180 Puts at $1.00 each ($2.00 total)
– Buy 1 Apr4th Put for $0.25
Break-evens on Apr4th expiration:
Profits: btwn 186.80 and 173.20 make up to 6.80, with max gain of 6.80 at 180
Losses: losses of up to 3.20 btwn 170 & 173.20 and btwn 186.80 & 190 with max loss of 3.20 below 170 or above 190
Yesterday, before reversing, the stock made a new recent high above 195. Today, it’s down near our long 190 strike, which also happens to be pretty significant support:
The theta (decay) on this structure is over 10c a day and will increase as we get into next week. We’re gonna give this thing one shot to become a winner and if not, look to close it somewhere near this level where it would be a much better loser (worth about 2 dollars here) than it was yesterday.