$IBM calls rack up more gains

IBM has been rallying since reporting strong earnings last week, and bullish option traders continue to reap profits.

On Nov. 6, Investitute’s market scanners found that 14,000 Weekly $130 calls expiring on April 18 were purchased for $4.55 as part of a bullish roll with shares at $122.81. Open interest in the strike was only 778 contracts before the trade occurred, showing that this was a new position.

Those calls traded for as much as $8.41 this morning, nearly double their purchase price. The stock rose 10.24% in the same time period, illustrating the kind of leverage that can be achieved with options. It was the second winning trade in the name posted on Investitute in less than a week.

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 0.04% to $134.33 today. On Jan. 22 the computing icon announced a positive outlook after surpassing earnings and sales estimates.

(Disclosure: I am long IBM.)