A little Big Black & Blue in International Business Machines

For those that trade earnings – meaning you put on a trade that is specifically designed to catch a post-earnings move – the earnings report for $IBM did not disappoint. I had a Bearish bias so this is the trade that I did:

  • BtO the April 205 Put
  • StO the April 200 Put
  • StO the April 195 Put
  • This was done on a 1:2 Ratio

Whoa!

Let me break this down for those that don’t understand:

  • I am long the April 205 Put (a Full position)
  • I am short the April 200 Put (a Full position)
  • I am short the April 195 Put (a Full position)
  • So for every 1 contract I was long the 205 Put, I was short 1 200 Put and 1 195 Put

As is the case with some trades, I was required to hedge the short Put pieces in after hours after the stock moved down through the key $200 level. I was looking for that $200 level to hold but the market said no way. So be it.

Here are some of my messages related to my activity in after hours:

IBM_tradeThis morning I initiated a 3rd short stock position (hedge) as it was struggling to hold the $197 level. This short stock position remains – hedge for the short April Puts – and I expect it to be called away.

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