DELL Trade Update

by Dan May 18, 2011 10:24 am • Commentary

Yesterday I took a quick look at DELL into it’s earnings report and came away with very low conviction into the print.  I offered a June Put Spread if you were inclined to play HPQ‘s weakness and the potential for similar at DELL.

DELL is doing a good job on the cost front and may be in a legitimate turnaround….that said as I stated this AM I am a bit skeptical of their forward guidance, and their lack of interest in being conservative with the stock at 52 week highs.  If the company comes in line when they report current quarter in Aug the stock will surely come back to support btwn $14-15.


Short Dated Trade: I just bought the DELL (16.80)  June 16/15/14 Put Fly for .15 as I think the stock will reverse these gains over the next few weeks in what I expect to be a weak market.

Break-Even on June Expiration:

Stock btwn 16 and 15.85 lose up to .15, stock btwn 15.85 and 15 make up to .85, payout trails off btwn 15 and 14 and lose .15 below 14.

Longer Dated Trade: I also just bought the DELL (16.75) Aug 15/14/13 Put Fly for .11 as my thought here is that a miss in Aug will send the stock back to that key 14 support level.

Break-Even on June Expiration:

stock above 15 lose .11, stock bwtn 15 and 14.89 lose up to .11, stock btwn 14.89 and 14 make up to .89, stock bwtn 14 and 13 payout trails off and below 13 lose .11.

TRADE RATIONALE: I didn’t have conviction yesterday, but after looking at the guidance I have greater conviction that the risk is too the downside btwn now and AUG and I want to look to define my risk in a low premium fashion.