Subject: Dell’s (DELL) Earnings Maintain the Rally

Dear Friend,

Today we bring you a brand new Trade of the Week! Each week we share a new trade idea directly from our trading team. For more on how you can join in on the profits, email Colin@terrystips.com.

Terry

June 1, 2021

Week 652

Dell’s (DELL) Earnings Maintain the Rally

DELL sold a lot of personal PCs last quarter. That was the main message form their earnings results that posted after the close on Thursday. Revenues were 12% higher than a year earlier thanks to a 20% jump in its consumer PC business. Earnings came in at $2.13 per share, blowing past the $1.61 estimate. The Street cheered the report, handing DELL a series of modest target price increases.

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The market was more ambivalent in its response, as the stock sank more than 4% before closing just a percent lower on Friday. The key, however, was that Friday’s low was right on DELL’s 50-day moving average, a trendline that has provided flawless support for six months. We don’t use the word “flawless” lightly. The stock has not put in a single daily close below the 50-day since Nov. 13 of last year. Pullbacks in January, February and May have all bounced off the 50-day to lead another push higher. In fact, since crossing above the trendline last year, the stock is up 50%. Currently, the 50-day sits just below 96, so we’re playing a credit spread at 95.

If you agree that DELL will stay above its 50-day moving average, consider the following trade that relies on the stock remaining above 95 through expiration in seven weeks.

Buy to Open DELL 16Jul 92.5 put (DELL210716P92.5)
Sell to Open DELL 16Jul 95 put (DELL210716P95) for a credit of $0.75 (selling a vertical)

This credit is $0.03 less than the mid-point of the option spread when DELL was trading above $98. Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will be only $1.30 per spread. Each spread would then yield $73.70. This trade reduces your buying power by $250 and makes your net investment $176.3 ($250 – $73.70). If DELL closes above $95 on July 16, both options will expire worthless and your return on the spread would be 42% ($73.70 / $176.30).

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

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Terry

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Subject: Dell’s (DELL) Earnings Maintain the Rally

Dell’s (DELL) Earnings Maintain the Rally