PeakTrader.com

[arthur]

IBM reports earnings after the close Mon. IBM traded between 81 and 83 1/2 over the past five days, and closed at just over 82 1/4. If IBM falls to around 81 3/4 Mon, that may be an opportunity to buy Oct 80 calls (which closed at 3 Fri). If IBM bounces to around 82 1/2 before the close, an equal Oct 85 put position may hedge the calls (which also closed at 3 Fri).

So, there would be little, if any, risk if IBM trades between 80 and 85 after earnings. However, if IBM rises significantly above 85 or falls significantly below 80, then a net gain will be made. However, it's important to consider all the possibilities (if possible), when trading, which include expanded possibilities.