Unprofitable: This trade is unprofitable if DELL Closes under $16.80 by April 20, 2012. The most I can lose on this trade is the amount the Put Spread can be worth $1 minus the amount I sold it for, $.21 for a total of $.79.
Reason I like this Trade:
My heart screams AAPL, so it says short DELL, but my wallet says long. Lets be honest when was the last time you heard someone say, i got this sweet new computer, “Its a Dell.”
We have seen strong earnings from “Old School” tech such as IBM, MSFT, and Intel. Dell is up 25% YTD while the Nasdaq is only up 13%. I would rather get long a pullback, than jump on a long into earnings. They have received 5 downgrades in the last 2 days, but still remains very strong. I think going forward they have issues with the Smart Phone market and their margins are now 22-23% vs historical level of 19%. The stock has been to strong to buy into earnings, but I can not short into the strength. I want to get long on a pullback, so I am putting the following trade on:
Monthly Dell has been in a very long drawn-out basing pattern. After breaking downtrend in early 2011, the $18.50 level seems significant since it was resistance in 2009. Even though technically overbought it has very near term positive relative strength suggests Dell will hold up and be a strong leader if the S&P remains strong.
UPDATE 2.23.2012 I talked on Bloomberg that I was willing to get LONG DELL on a pullback and the stock still has not sold off under the $17 strike, so I comfortable with this trade. Currently this Put Spread is worth $.27, so a small loser, but only a small one, because volatility got crushed so badly.
UPDATE 2.24.2012 With DELL rallying this Put spread is only worth $.25. I wish this was a March position, but it is until April, so I will have to always keep an eye on this one.
UPDATE 2.29.2012 This spread is still worth $.26, but everyday DELL does not sell off, in theory the less this spread will be worth. I will leave this trade on.
UPDATE 3.5.2012 This spread is still worth $.28, but I am leaving it on as it seems as if DELL could bounce off this $17 level.
UPDATE 3.9.2012 This spread is worth $.34 and time is on my time. I might look to Punt this trade once I get a little more bored, lol.
UPDATE 4.9.2012 This spread is worth $.68, but since I saw paper sell April 16 Puts for $.16, I will leave this trade on until expiration.