Cover Positions in IBM With Covered Calls

IBM (NYSE:IBM) — “Big Blue” is the bluest of the blue-chip technology stocks. Its global capabilities in information technology, software, computer hardware and related financing make it a household name. It is a company that is in full maturity, so future growth is expected to result from strong trends in emerging markets and improved profitability in its more developed markets.

Earnings for 2011 are estimated to increase to $13.40 from $11.52, and early this year analysts targeted the stock at $200 to $205 within 12 months.

Technically IBM had been advancing in a bull channel, but upside breaks have been followed by sharp corrections. Revenues are expected to rise 3.5% in 2012 versus 7.5% this year, thus IBM may be somewhat overpriced at $192.

Owners of IBM should consider writing options on the stock, and those thinking of investing should wait for a pullback below $180.

Trade of the Day – IBM (NYSE:IBM)
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