Condor Options

IBM rallied sharply yesterday, but volume was light until the final hour of trading. Nevertheless, the rally continued today, pushing the stock to a breakout above its May 14th high. With IBM trading beyond our projected break-even point of $128.75 and within striking distance of its year 2000 high, we’re rolling half our calendar-spread position at 125 up to the 130 strike, as follows:

+2 IBM June 125 puts
-2 IBM July 125 puts
for a net credit of $1.50.

+2 IBM July 130 calls
-2 IBM June 130 calls
for a net debit of $1.90.

This gives us a 125/130 double-calendar with break-evens at $123.50 and $131.75. Our delta now is pretty much neutral. As usual, the number of contracts above represents half of our original position; so if you started out with 8 contracts per leg, for example, you’d be rolling 4 of them from 125 to 130.