11:50am (EST)

International Business Machines (IBM, $175.93, down $10.80) shares are taking a hit today after the company announced its quarterly numbers.  The stock is down 6% and has accounted for 70 negative Dow points that has held the blue-chips back from turning green.  IBM reported a profit of $3.99 a share versus the suit-and-ties forecast of $3.96 a share.  That looked good on paper but the $1 billion revenue miss didn’t.  Sales came in at $23.7 billion and well short of the expected $24.8 billion.

We had a feeling shares might slip if they didn’t beat revenue estimates or offer a rosy outlook.  IBM was one of our possible short ideas for an earnings trade in the Weekly Wrap Sunday night for this week and here were our thoughts along with the chart work (10/11/13 closing prices):

International Business Machines (IBM, $186.16, up $1.39)

November 175 puts (IBM131116P00175000, $1.70, down $0.55)

Thoughts:  Shares usually do well after an earnings report and it is hard to go against Big Blue.  However, analysts have been lowering their numbers so IBM may have to pull a rabbit out of their hat when they report their numbers.

IBM101713

 

The November 175 puts (IBM131116P00175000, $3.80, up $2.07) dropped 50 cents to $1.75 ahead of Wednesday’s close and are up 120% today.  The options were a little pricey for us to play as an earnings trade but the double in less than a day would have been nice.

If you are not a member of the Weekly Wrap, we suggest signing up now as we will be covering next week’s earnings this Sunday night.  We follow some of these trades in the Daily and at times we will take 1 or 2 of them but for the full list of trades, we list them in the Weekly Wrap in our Earnings section.

We do have one trade we like as an earnings play for tomorrow’s session and we plan to be in-and-out in less than 24 hours.  We will be wrapping up a lot of trades tomorrow and we will be entering next week locked-and-loaded as we will have plenty of room to start our next batch of trades for November, December, and into January.

As we head to press, the Dow is lower by 57 points to 15,316 while the S&P 500 is higher by 3 points to 1,724.  The Nasdaq is up 10 points to 3,849.

Subscribers, check the Members Area for the New Trade and current updates.  We could also have additional New Trades or Profit Alerts so stay tuned into the close.