If there are two things traders love right now, it’s cutting-edge technology and comeback stories across America. Throw in aid from the U.S. government, and that became the recipe for success.
That may explain why traders are pouring money into options. IBM Following the news, the Armonk, New York-based giant will receive $1 billion from the U.S. Department of Commerce, the largest recipient of a series of grants supporting quantum computing.
Options traders flooded the stock, trading about 200,000 contracts at a rate 15 times the daily average over the past 30 days, according to data from Cboe’s LiveVol. Calls outnumbered puts by almost 8 to 1. More than 42,000 calls were bought, compared to 27,500 sold and less than 4,000 puts.
It’s not hard to see parallels with the government’s support for IBM as an investment in semiconductor giant Intel, which withdrew from the deal. Intel’s stock price fell 70% for several years, then turned around last year when the government took a 10% stake. Intel is up 500% from last year’s lows, rewarding option traders who made huge bets on the bull market.
IBM 5 year chart
IBM, which enjoyed a multi-year bull run on its pivot to cloud and hybrid services, has fallen 30% since November due to a broader decline in its cloud-centric business.
The stock’s biggest options traders on Thursday appeared to believe the deal could trigger a multi-year trade. They spent $2.7 million to purchase more than 500 contracts out of 260 strike calls that expire on December 15, 2028.
This is the longest-dated contract available for trading stocks and comes with a significant time premium. This means traders will actually need to receive $312 from IBM before expiration, or about 30% more.
