A legacy tech stock is setting up for big gains ahead. How to trade it while hedging risk
Thursday was a quantum leap for IBM (pun intended), as the stock jumped over 12.5% higher due to a Government injection into the domestic quantum computing supply chain, adding about $26 billion to Big Blue’s market cap. Similar to the manner that moved Intel dramatically higher after government intervention last year, I want to own more upside exposure in IBM by using options. The U.S. Department of Commerce officially signed a Letter of Intent under the CHIPS and Science Act to issue over $2 billion in federal grants to secure America’s quantum computing supply chain. IBM secured the maximum prize, taking home a massive $1 billion federal subsidy. IBM has been a laggard all year (down 13% year to date), but yesterday’s massive technical breakout could serve as a catalyst to reverse its recent negative performance. This news also positions IBM right at the absolute center of the domestic deep-tech landscape. IBM was identified as an essential company several years ago and is a constituent in my Essential 40 ETF (ESN) . IBM is no longer the boring “Big Blue” narrative of yesteryear. IBM YTD mountain IBM year to date Beyond quantum initiatives, IBM continues to advance its broader technology offerings. The company launched new AI inference and virtualization services on its cloud platform with Red Hat to help enterprises scale artificial intelligence and modernize IT systems. Additionally, IBM expanded its partnership with Oracle to bring its watsonx AI offerings to Oracle Cloud Infrastructure, with watsonx Orchestrate AI agent offerings becoming available in July. I believe IBM’s comprehensive strategy to position itself across multiple high-growth technology domains including quantum computing, enterprise AI adoption, and hybrid cloud solutions are the driver to new all-time highs above $325 which printed last November. I want to use a call spread to define my risk and capture a potential move higher in IBM over the next few months. In addition, I want to sell a put option to collect some premium as I am comfortable owning more IBM in the event the short-term direction is lower. This collection of premium will also reduce the cost of the bullish call spread. The trade Sold the $240 IBM put 7/17/2026 for $7 Bought the $275 IBM call 7/17/2026 for $12 Sold the $325 IBM call 7/17/2026 for $3 IBM was roughly trading $263 when this trade was executed. This spread costs an investor just two dollars with the opportunity of capturing $48 of upside in IBM (from $277 to $325). An investor must be prepared to own IBM in the event IBM moves under $240 by expiration in roughly two months. DISCLOSURES: Kilburg is long this spread, long IBM personally and long IBM in the Essential 40 ETF (ESN) . All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
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