Call Options Or Put Options On International Business Machines (IBM)?

| July 16, 2014 | 0 Comments

IBM OptionsInternational Business Machines (IBM) hasn’t exactly been the strongest performer this year. However, the blue chip company may have just changed its fortunes this week.

IBM shares are currently trading at $191.49, up just about 2% on the year. The stock is trading 3% below the 52-week high of $198.06 and is 13% above the 52-week low of $169.73.

Is this an opportunity to buy call options on IBM because of the company’s new sales deal with Apple (AAPL)? Or should you buy put options on IBM because the company is late to the race?

The bulls make a convincing argument…

After years of an ongoing rivalry, IBM put aside its competition with Apple and will be teaming with the world’s largest retailer. IBM’s salesforce will now be recommending Apple devices to its corporate customers.

Apple’s tablets and smartphones are already ultra-popular among retail consumers. The deal with IBM gives the company a huge entry point into the business world.

In turn, IBM will be able to sell its software and services to companies needing to manage employee mobile devices. It also gives IBM much needed diversification into the mobile device market.

But the bears have a compelling case as well…

Ultimately, this sales deal between IBM and Apple will benefit Apple much more. IBM is still going to have to sell its services and products on top of selling Apple devices.

More importantly, IBM is very late to the mobile device race. They’ll be competing with thousands of existing apps and services already on the market.

What’s more, this sales deal may help diversify IBM’s revenue streams, but it doesn’t replace the company’s huge reliance on server sales. And, the hardware market continues to shrink at a rapid rate.

So is it time to be bullish on IBM due to the Apple deal, or should you take a bearish position because IBM is behind the curve?

If you think the bulls are right, take a look at buying the IBM August 195 calls for around $3.00.

If you think the bears are right, take a look at buying the IBM August 190 puts for around $3.25.

Yours in Profit,

Gordon Lewis

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Category: Call Or Put Options?

About the Author ()

Gordon Lewis is the Chief Investment Strategist and editor for the popular daily newsletter – Options Trading Research. He’s also editor of our dynamic theme-based options trading service, Advanced Options Adviser, and one of the key analysts behind the highly successful Options Trading Wire.