$IBM bulls double their money

Bullish option positions opened in IBM last week yielded substantial profits today, thanks to strong earnings and revenue.

On July 9, Investitute’s market scanners identified the purchase of 5,000 July $146 calls for $2.30 to $2.50 with shares at $144.62. This was clearly fresh buying, as volume was well above the strike’s open interest of 1,050 contracts.

Those calls traded for $4.60 this morning, twice their initial purchase price. The stock rose 4.03% in the same time frame, illustrating the kind of leverage that can be achieved with options.

Long calls lock in the price where a stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

IBM was up 3.27% to $149.24 today. The computing icon beat estimates on the top and bottom lines after the market closed yesterday.

(Disclosure: I am long IBM.)