Options are one of the most powerful tools for small-account traders.
And the market just reminded us of that…
A $100 put contract on July 13 for this $290 stock was worth $217,000 the very next day.
Some of these trade setups are so strong, they hit like an ATM glitch.
The actual stock dropped 26%, compared to a 216,900% change in the options contracts.
Anyone who shorted the stock (trading actual shares) got cheated out of an options setup that offered 8,342x their trade setup.
Are the numbers getting through to you?
- The contracts are cheaper than trading the regular shares.
- And the percent gain is larger.
That’s a win-win scenario.
An Incredible Selloff
This stock had its worst day since 1961.
And the catalyst was a pre-earnings announcement… the earnings come on July 22.
This is why I trade options … just look at what happened to International Business Machines Corporation (NYSE: IBM) this week.
A $100 position in the 7/17/26 $242.50 Put contracts on July 13 was worth more than $217,000 on July 14.
Management issued weaker guidance and told investors it would miss its sales and earnings targets for the quarter.
When a stock preps investors for poor earnings data, you know it’s BAD.
After the revision, IBM projects second-quarter sales of $17.2 billion against Wall Street’s $17.85 billion estimate. And a non-GAAP earnings of $2.93 versus the $3.02 Wall Street projections.
Don’t let the decimals throw you off … that’s a quarterly sales miss of $650 million.
CEO Arvind Krishna pinned the shortfall on weak mainframe demand. The z17 cycle cooled faster than expected, and clients shifted their spending toward servers, storage, and memory to lock in supply before those prices climbed.
The market did not take it well…
IBM fell as much as 24% in early trading, and the total damage as of July 15 is close to 29%.
Strategist Mike Zaccardi pointed out on X that the stock was on pace for its worst single session ever, going back to 1961. The last time it had a move that big, Ronald Reagan was president.
Microsoft Corporation (NASDAQ: MSFT) and Amazon.com Inc. (NASDAQ: AMZN) both fell in the same session due to AI weakness.
Now Look Closer
If you shorted IBM stock the day before the warning, you did fine.
The stock fell from roughly $290 per share to $214. That’s a 26% move. A respectable short.
But the options were on a whole different planet.
The $242.50 July 17 Puts gained 217,000% overnight…
The same thesis, on the same stock, with a completely different outcome.
That’s the asymmetry I’ve built my entire career on. A 26% move in the shares becomes a life-changing number in the put contracts because short-dated options magnify every percent change in the underlying stock.
You can’t manufacture that kind of payoff by buying or shorting a stock’s regular shares. It only lives in the options market.
The Setup Isn’t Finished
Now for the part that isn’t hindsight…
IBM hasn’t printed its actual earnings yet. That report drops on July 22.
The stock already cratered on the warning. So the pain might be priced in… or the real numbers could deliver a second leg down if the details read worse than the pre-release let on.
Either way, there’s a trade here.
Look at the chart with weekly candles. IBM is sitting right on top of the $200 support from back in May 2026. That level held once. If buyers defend it again, the beaten-down crowd may step in for a bounce into the report.
Now let’s flip to the daily chart.
The stock sliced clean below its 50-, 100-, and 200-day moving averages, all clustered up near $250 and $260.
When stocks spike or dip too far from the EMAs, they eventually snap back.
I’m watching two things on July 22: does $200 hold, and how does the price behave as the report approaches?
There’s only one caveat, and it’s the same one I’ve preached all summer.
The volume is thin during the summer months. The big money is still on vacation until the fall surge shows up.
So keep your size small. Small enough that a slow, choppy day doesn’t rattle your confidence.
IBM handed us a textbook lesson this week. Learn from it.
Study the move. Mark your levels. And keep your eyes open as we approach July 22.
Stay Street Smart,
Jeff Zananiri
*Past performance does not indicate future results, Not typical.
