The automated Quantcha Trade Ideas Service has detected a promising
IBM was recently trading at $179.88 and has an implied volatility of 16.57% for this period. Based on an analysis of the options available for IBM expiring on 20-Oct-2017, there is a 42.13% likelihood that the underlying will close within the analyzed range of $148.22-$181.16 at expiration. In this scenario, the average linear return for the trade would be 75.91%.
Price target: Zacks Research has updated their six-month price target for IBM to $164.69. This price target is a consensus price created from the price targets published by 16 participating analysts whose targets ranged from $125.00 to $200.00.
Mean recommendation: Zacks normalizes analyst recommendations to a 1-5 scale where 1 indicates a strong buy. Their mean recommendation for IBM has been updated to 2.82, which indicates a hold consensus from analysts. Sentiment has moved from 2.82 to 2.71 to 2.71 over the past three months.
Trade approach: The difference between the current price for IBM and the mean price target is $14.38, which represents a 8.45% move (17.87% annualized). Since the 180-day implied volatility for IBM is 18.56%, a bearish strategy could prove effective if the price target ultimately turns out to be accurate.
Upside potential: Using this bearish strategy, the trade would be profitable if INTERNATIONAL BUSINESS MACHINE closed at or below $181.80 on 20-Oct-2017. Based on our analysis, there is a 53.99% likelihood of this return.
Downside risk: As with any options trade, there is a substantial downside risk where you may lose most or all of your investment.
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This is an automated post generated based on a market analysis of delayed data at 2/28/2017 12:19:06 PM ET. The analysis does not include brokerage fees or commissions and is not investment advice.