In Friday’s sell-off, IBM lost more than $3.50—that’s 2-1/2 times its one-day standard deviation—plunging through support at its 20-day moving average. After a pause Monday and Tuesday, the stock sold off hard again this morning and is getting close to our break-even. The market’s moving fast today, and we want to give our calendar spread more room on the downside. We’re rolling half of our call spread at 130 down to a put calendar spread at 120, as follows:

-1 IBM July 130 call
+ IBM June 130 call
for a net credit of $1.40;

+1 IBM July 120 put
-1 IBM June 120 put
for a net debit of $1.95.

Again, the one contract trade size above represents half of our position at the 130 strike (which itself is half of our original, single-calendar trade). We’ve now turned our adjusted, double-calendar into a center-weighted triple-calendar, with break-evens at about $121.50 and $129.50.

Last 5 posts by Condor Options

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