IBM Earnings Miss – Bearish Options Flow Came Before the Sell-Off
Bearish IBM options flow began building more than a week before the company released disappointing preliminary second-quarter results.
SmartFlow’s two-week data showed approximately $2.3 million in net bearish flow and a -0.64 net score, classified as strongly bearish, before IBM shares suffered a sharp double-digit sell-off.
The activity did not predict the exact earnings figures, however it showed that parts of the options market were positioning defensively before IBM disclosed the shortfall.
Bearish IBM Options Flow Picked Up Before Earnings
The earliest notable bearish activity visible in SmartFlow appeared on July 2, when traders bought approximately $564,000 of IBM July 24 $285 puts.
The bearish positioning intensified on July 6 with roughly $1.6 million in August 21 $295 puts. Because these contracts expired well after IBM’s scheduled earnings announcement, they offered traders more time for a potential downside move to develop.
Bearish-leaning activity remained visible immediately before the announcement. On July 13, SmartFlow detected approximately $353,000 in July 17 $287.50 call-selling flow.
Taken together, our dashboard showed:
- Net options flow: approximately -$2.3 million
- Net score: -0.64, classified as strongly bearish
- Bought flow: 87%
- Written flow: 13%
The important detail was not one isolated options trad but the persistence of bearish IBM options flow across several sessions, expirations and strike prices.
What IBM Missed in Its Preliminary Q2 Results
IBM expects to report approximately $17.2 billion in second-quarter revenue, compared with Wall Street expectations of around $17.86 billion. Adjusted earnings are expected to reach $2.93 per share, below the approximately $3.02 per share analysts had forecast. IBM shares dropped about 17% in premarket trading following the announcement.
The company’s infrastructure business was a major source of weakness. IBM reported that preliminary infrastructure revenue declined 7%, while software revenue increased 5% and consulting revenue remained flat.
CEO Arvind Krishna said IBM had not adapted quickly enough to changing client spending conditions. He added that numerous large deals failed to close within the expected timelines, accounting for most of the shortfall. IBM also said customers had redirected capital expenditure toward servers, storage and memory as they attempted to secure supply ahead of potential price increases.
These are preliminary figures rather than IBM’s complete quarterly report. The company is scheduled to discuss its full second-quarter results and updated expectations on July 22, 2026.
What the Bearish Options Flow Actually Signaled
The flow did not prove that traders knew IBM would miss expectations as options can be purchased for many reasons, including portfolio hedging, volatility strategies and protection against an existing stock position.
Still, the combination of repeated put buying, bearish call selling, negative net premium and a strongly bearish SmartFlow score suggested that downside protection or speculation was increasing before the preliminary results became public.
A single large put trade can easily be misinterpreted. It might be one leg of a spread or a hedge against a much larger long position.
When bearish activity appears repeatedly across several dates and expirations, however, it becomes more relevant as a market-intelligence signal.
In IBM’s case, the options activity developed in stages:
The first put buying appeared on July 2. A substantially larger bearish trade followed on July 6. Additional bearish flow then appeared on July 13, one day before the preliminary announcement.
Why Aggregate Options Flow Matters
Raw options-flow feeds can produce thousands of trades without explaining which ones are important. SmartFlow combines individual transactions into net-flow and scoring metrics to show whether positioning is becoming consistently bullish, bearish or mixed.
For IBM, the negative net score helped show that bearish activity was not limited to one unusual print. The broader two-week flow had shifted decisively toward puts and bearish call activity.
That does not make options flow a guaranteed earnings predictor. The useful takeaway is that IBM’s options market was already displaying elevated caution before the company reported weaker-than-expected preliminary results.
SmartFlow helps traders identify these changes in positioning, compare them across multiple timeframes and investigate whether the flow is supported by volume, liquidity, technical levels and broader market conditions.
This article is for educational purposes only and is not financial advice.