DELL reported quarterly results on Thursday after the bell that slightly exceeded expectations in terms of sales and earnings. The company shipped more than 50 million PCs in 2020, a record high, capitalizing on the increased demand for activities at home amid the pandemic. In response, several analysts raised their price targets to $ 101, up $ 20 from Friday.
The strong results kept DELL’s share price in the right direction. During the week, the stock rose slightly, which is impressive given the Nasdaq’s 5% plunge. Over the medium term, the stock is hovering at its rising 20-day moving average since it was exceeded more than three months ago. Note that the short strike of our credit spread (red line below) is below the 20-day and recent lows near $ 78, so this double support would have to be broken for the spread to get into the money.
If you’re okay with DELL’s uptrend continuing, or at least staying above $ 78, consider the following trade, which depends on the stock staying above $ 77.50 by the seven-week expiry.
Buy to Open DELL 16Apr21 75 Put (DELL210416P75)
Sale to open DELL 16Apr21 77.5 Put (DELL210416P77.5) for $ 0.90 credit (sale of a vertical)
This credit is $ 0.03 below the midpoint of the options spread when DELL was trading near $ 81. If the stock doesn’t recover quickly from here, you should be able to get close to that amount.
Your commission on this trade is only $ 1.30 per spread. Each spread would then be $ 88.70. This will reduce your purchasing power by $ 250 and bring your investment to $ 161.30 ($ 250 – $ 88.70). If DELL closes above $ 77.50 on April 16, both options will expire worthless and your return on the spread will be 55% ($ 88.70 / $ 161.30) or 408% on a yearly basis.
As with all investments, you should only trade options with money that you can really afford to lose.
Have fun trading,
Tags: Bearish Option Strategies, Bullish Option Strategies, DELL, Monthly Options, Portfolio, Profit, Profits, Puts, Risk, Terry’s Tips, Weekly Options
This entry was posted on Monday March 1st, 2021 at 9:00 am and is filed under Last Minute Strategy, Monthly Options, Stock Option Trading Idea of the Week, Stock Option Strategies, Weekly Options.