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Home › Forums › Swing Trades › Gap Fill Resistance Short in IBM
Simple idea here.
After looking like absolute death, the stock gapped up on some sort of news above 130 and has rallied about 20 points since then. It’s been overbought for a few days now and is running hard into a gap fill resistance.
Straight up put buys in May make the most sense… that’s when earnings is and it means that the premiums will continue to stay elevated in the options. In other words, you don’t have to worry about theta risk.
Here’s the setup… levels noted here are also marked on the chart.
Buy to Open IBM May 145 Put @4.35 or lower
Add to the trade at 152.50.
Stop out on a close above 155.
Sell half into 145, trail stop on the rest.
Here’s how the stock is looking right now.
Our “scale” point was hit sub 145.
It’s time to re-add as 152.50 got hit:
Buy to Open May 145 Put @2.95
Because the stock consolidated for two weeks before running higher, you need to adjust your stop. Close out if the stock closes above 157.50