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Market Over-Reaction Around IBM's Earnings

|Includes: International Business Machines Corporation (IBM)

IBM share prices ran up into earnings, then gave it back rapidly in after hours, based on mixed results that were within a rounding error of expectations.

There was a slew of instant analysis articles, providing zero insight behind negative headlines. The Q&A was marked by one analyst who seemed more intent on pushing a negative view than eliciting information.

I watched in wonder.

I'm still mildly bullish here, and plan to stay with my strategy of giving it two years, starting in January this year. Given IBM's seasonality, specifically the historically strong 4th quarter, there is no reason to get worked up over quarterly numbers.

I have deep in the money LEAPS, expiring January 2016, that need to be rolled out to 2017 within the next six months. It seems that the price action around earnings is providing trading opportunities, and I will be looking to do the roll in a way that takes advantage of these fluctuations.

Logically the easiest way would be to look for a repeat of the pattern next quarter: a run-up based on nothing, followed by a give back when the news comes out exactly as expected.

Disclosure: I am/we are long IBM.