If Big Blue were to get hit hard today, we should be waiting at 121.04 to catch a possible swing low. Bid for two July 120 calls, but stop yourself out if the stock trades lower than 120.89 thereafter. A bid of 4.10 would be about right if the order were to fill today, but you should lower it by a dime if we try this trade again tomorrow. If you use a 4.10 limit order, keep your bulletin launcher switched on, since I may advise raising or lowering the bid, depending on how the options behave. Typically, call volatility increases when a stock falls, so the options could conceivably be trading as high as 4.30. If they were trading for less than 4.10, I would infer that call options in general were in plentiful supply. I’ve included a snapshot of an option calculator that shows how I estimated a fair value for the calls. UPDATE: IBM went the wrong way, negating our strategy.