Daniel.B
Short

Put Ratio Backspread, Shorting the gap

NYSE:IBM   INTERNATIONAL BUSINESS MACHS
180 12 5
Well as this stock did gap down with good volume supporting the move. I decided to enter short through a Put ratio backspread. Reason being that this options' strategy simply limits my risk in regards to the large gap between 172.50 / 162.50. All in all, I'm looking for further downside to retest the 150.00 / 152.00 area.

For those wondering what a ratio backspread spread is I'll give you a link with a definition of it. Feel free to also just google             put ratio backspread if you want to find a better explanation of it.
http://www.theoptionsguide.com/put-backspread.aspx

The position:
  • Bought +2 100 AUG 15 157.5 Puts
  • Sold/Wrote -1 100 AUG 15 162.5 Puts

The trade:
  • Exiting at a loss if we get a daily close above the 200 Moving Average .
  • Exiting at a profit if we reach the 150 / 152 area.

Cheers, happy trading! =)
ITM.Trading
a year ago
I am short too from 162 break of daily/weekly lows
This will be a good one to pyramid into all the way to 150 potentially IMO
+1 Reply
Daniel.B ITM.Trading
a year ago
Thanks for the comment! Nice man, and your right it does look like a good one to pyramid into. =)
Reply
ITM.Trading Daniel.B
a year ago
Trends your friend!
+1 Reply
Daniel.B ITM.Trading
a year ago
Indeed it is! =D
Reply
Very nice.
+2 Reply
Daniel.B Tom_Killick
a year ago
Thanks Tom! =)
Reply
moneymaking
a year ago
Hey Daniel, nice setup. I just heard yesterday on cnbc, that Warren Buffet lost 700 million on IBM. I'm not sure how reliable this information actually is. Do you anything about this? Maybe its due to this huge gap. What was the cause of this gap?
+1 Reply
Daniel.B moneymaking
a year ago
Hey whats up moneymaking! I wasn't watching CNBC yesterday hehe, but if he has lost 700M then its more of he's held IBM at the weekly / monthly highs for quite some time. And since then its greatly under performed so that would be the reason for the loss, Buffet doesn't trade, more of an investor. The gap was due to the earnings report on monday.
+1 Reply
greenplay
a year ago
Is it time to go long on IBM again? Would like to see your charts.
Reply
Daniel.B greenplay
a year ago
Hi thanks for the comment, I actually took most of the short position off and left a very small portion on the table. But in regards to your question, I unfortunately do not give out trading signals. So I cannot tell you whether you should go long / short. A couple months ago I wrote down a couple posts with some good trading books that I believe can benefit your trading knowledge though. Also, another good technical trading book is "The Honest Guide to Candlestick Patterns by Llewelyn James".

But to answer your question I personally see no reason to go long IBM in my own opinion. At the same time price is way to near to support for me to consider shorting it at this level also.
Reply
greenplay Daniel.B
a year ago
Thanks for suggesting the book. Would be interesting to go through. Actually I did not mean for your recommendation to buy/sell for my own trades. My idea was to see your new charts on IBM with support and resistance. I like your charts and find you as breakout/breakdown trader. Typical my trading style.
+1 Reply
Daniel.B greenplay
a year ago
Oh ok I misunderstood you, thought you were asking for a signal lol. My apologies, I'll PM you a IBM chart with the S/R areas that I personally see. Yea for the most part I am a breakout/breakdown trader just looking to catch the momentum =D
Reply
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