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.
DELL Chart March 2021
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,
Terry
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.
