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Look Who's Betting on Big Blue

Amid the excitement over Facebook options, a far less obvious and somewhat overlooked development occurred in the options market: traders piled into IBM calls.

Specifically, investors snapped up 1,400 contracts of the July 205-strike calls, making it the second most active call contract. This is not a particularly profound event – except for the fact that it was the exact strategy we recommended on Friday’s "Options Action." The trade came courtesy of Mike Khouw and Carter Worth, who saw a convergence of technicals and fundamentals that ultimately flashed a big bright “buy” sign. Trade and breakdown are below, and yes, imitation is indeed the sincerest form of flattery.

MIKE’S IBM OPTIONS TRADE

  • BUYING THE JULY 205-STRIKE CALLS FOR $2.15

HOW MIKE’S IBM TRADE MAKES MONEY

  • PROFITS ABOVE $207.15
  • LOSSES BELOW $207.15

Our other trade came courtesy of the newest member to the desk, Enis Tanner of Riskreversal.com. He took a contrarian view on Carl Icahn’sgrowing position in embattled Chesapeake stock, and pointed instead to low natural gas prices and the growing chaos surrounding CEO Aubrey McClendon to inform his bearish view. Enis suggested buying the July 14/12 put spread for an fifty-cents. His trade and payout are below.

ENIS’ CHESAPEAKE TRADE

  • BUY THE JULY 14-STRIKE PUT FOR $1.05
  • SELL THE JULY 12-STRIKE PUT FOR $0.55

HOW ENIS’ (CHK) TRADE MAKES MONEY

  • LOSSES ABOVE $13.50
  • PROFITS BETWEEN $13.50 - $12.00
  • PROFITS CAPPED AT $12.00

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    Melissa Lee is the host of CNBC's “Fast Money” and “Options Action.”

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