Hewlett Packard (HPQ) – Dell (DELL) – PC Market Share

Hewlett-Packard (HPQ) has become number one in PC sales. HP’s rival Dell (DELL) gave up their number one position in the third quarter of this year as their sales numbers began to slump. In recent years Dell has had to slash their PC prices, and ultimately their profit margin, to increase sales and many analysts believe this has hurt their bottom line.

Second-quarter profits for Dell fell 51%. The third-quarter market share for Dell fell from 16.6% to 16.1% and Dell’s stock is down over 16% for the year. On the bright side, the company has announced it is giving up its strategy to maximize market share for one targeted to increase profits. Many analysts feel this new company philosophy could yield increased profits in the coming year.

HP has problems of their own; they have suffered from the widely publicized recent ethics scandals involving the HP board of directors. However, the stock appears to be rebounding and the recent PC market share news will give HP a needed shot in the arm. Both Dell and HP are reporting about a 5% operating margin and their market shares are nearly identical.

Both company’s stock prices are either showing signs of growth or stagnation, making them perfect candidates for a covered call investment strategy. For more information on covered call investing see PowerOptions’ covered call example.

For this trade, we will consider both Dell and HP covered calls using PowerOptions’ option chain tool. This will allow us to see all the available stock options across several months. The option chain tool offers several ways for the user to view option chains. You can see all call and put chains for a particular stock or you can look at just options with strike prices near (five above and five below) the current stock price. This allows you flexibility to look at the information that best fits your investment style.

Below is a chart showing some possibilities for Dell and HP covered calls. These trade suggestions were designed while keeping in mind the sage guidelines suggested by PowerOptions’ covered call rules of thumb:

PowerOptions option chain tool informs us there is a 56.1% probability the Dell covered calls position will be at or above the strike price at expiration and the HP covered call has a 51% probability to be at or above the strike price. These are theoretical probabilities based on commonly used option pricing models.

Both trades listed above provide reasonable downside protection (3.9% & 4%) and reasonable potential profit (4% to 4.6% in 33 days) and are good examples of the types of trades made available to subscribers of PowerOptions’ stock options search products.

PowerOptions provides a free 14-day trial of its service. So join PowerOptions today, and you too can start reaping the benefits of the covered call investment strategy.

PowerOptions provides Internet based tools for analyzing stock options with specific search criteria and for finding potentially lucrative option income. For those seeking to execute a covered call investment strategy for their personal portfolios, PowerOptions provides an Internet based search engine for finding potentially lucrative income producing stock options positions.

PowerOptions’ sister company PowerOptionsApplied provides expert stock option trading recommendations. PowerOptionsApplied specializes in covered calls, naked puts and iron condor stock options strategy recommendations. PowerOptionsApplied provides a 30-day risk free trial of its service.

[tags]DELL, Dell Computer Corp., HPQ, Hewlett Packard, covered call example, covered call investing, covered call investment strategy, covered call rules of thumb, investment strategy, iron condor, option income, poweroptions, stock option trading, stock options[/tags]