The Wall Street Journal-20080115-Traders Jump on IBM Gains
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Traders Jump on IBM Gains
Traders jumped into International Business Machines Corp. contracts as the technology giant exceeded earnings expectations.
IBM issued preliminary results for the fourth quarter, which showed a 24% increase in profits compared to a year earlier. Shares of the Armonk, N.Y., company rose 5.4% to $102.93.
Options activity suggested investors are bracing for more gains in IBM shares, but only to a point.
Nearly 54,000 call contracts changed hands, about seven times the average daily volume in December. The heaviest trading was in January 105 calls, which give holders the right to buy the stock at $105 by the end of the week. More than 17,000 of these call contracts changed hands, compared to open interest of 15,000.
Trading was active further out as well, with heavy action in February call contracts at $105, $110 and $115 strike prices. However, analysts at Interactive Brokers noted short activity in call options at the $115 strike price, and an increase in implied volatility -- a measure of risk.
Meanwhile, Genentech Inc.'s implied volatility rose to about 50 from 30 as investors awaited its earnings, posted after the close of regular trading.
There was also notable volume in Apple Inc. call contracts as the MacWorld conference kicks off. Trading was active in option contracts that pay off if Apple shares rise as high as $200 this week. Apple shares ended the session at $178.78, up 3.5%.
