12/4/2013 WED    

International Business Machines                 NYSE: IBM   Close 176.08

Avg. Volume  4,921,991

52 Wk Lo       172.57

52 Wk Hi        215.90

Support    175.60*   172.60**   167.25/169.70***    159.6/153.85****

Resistance     178.25/178.95*   179.71**   182.30/182.65***

PE Ratio 10.51

IV Dec Monthly 19.03%   Jan 19.02%

IBM has been in a downtrend since late March when it made new his at 215.90

The 170/155/140 put Butterfly in January is trading on the mid for around 1.45 which is an approximately a 9 to 1 risk reward scenario with the risk at $145 and potential reward of $1,355 should the shares drop to the mid to upper150 area.

The Dec 175/165 put vertical is also attractive which is trading around 1.85 on the mid point.

The Jan Butterfly spread offers more time as well as allows you to sell out of the long vertical portion of the fly should the move come earlier than anticipated which would leave you short the 155/140 put vertical which is why I prefer to be positioned in the butterfly though with the Dec put vertical you have a chance to roll into a butterfly or put condor should the opportunity present itself.

Open Int. (est.)   strike   Dec Monthly (16)          JAN 14 Monthly (44)

140              152                                      2,047

145              268                                      1,380

150              294                                      3,161

155            1,572                                     2,193

160            8,219                                     4,000

165            7,498                                     6,787

170            9,716                                     8,169

175            8,835                                     8,633

For a better understanding of Butterfly spreads you can see a full 3 part article published on https://tradersexclusive.com

Also for trading ideas and commentaries and responses from industry professional go to https://mtmtradercommunity.com

*Disclaimer: This is not a recommendation. All trading entails risk. Anyone employing any strategies and having limited knowledge of options trading should consult with a FNRA licensed professional.