Stock Option Advisory

A Company in Transition – Dell Computers – Covered Calls

Dell (DELL) shares opened over 3% higher today following the company’s positive earnings report last night. The stock fell to a 1.5% gain as of 1 pm. The computer maker was able to beat estimates for sales and earnings in the first-quarter. The company also announced it would cut 8,000 jobs in the coming year.

Some analysts, however, have expressed their displeasure lately as Dell is lowering its expectations by selling at lower margins. Some market watchers feel Dell’s abandonment of direct sales in favor of low-margin retailers such as Wal-Mart (WMT) is emblematic of the problem.

Signup now for PowerOptions free 14-day trial

Audio Podcast:
An audio podcast of this article is available at:

Signup now for PowerOptionsApplied 30-day risk free trial

Dell’s move to sell in Wal-Mart:
The Wal-Mart issue isn’t something all analysts agree on. Crows Business Week wrote, “The move helps Wal-Mart bolster its electronics business and gives Dell a new venue for PCs outside of the faltering direct-sales arena.” And Business Week wrote in their article entitled “Dude, You’re Getting a Dell-at Wal-Mart,” “As befits a merchandising venture with Wal-Mart, the two models offered will carry a low price, each offered in a package bundle under $700. The companies expect high “consumer feedback and purchase response,” Wal-Mart said in a press release.”

The AP was a little more ambiguous with its headline “Analysts Not Sure Dell’s Retail Plans Will Lead to Improved Profitability.”

While Standard & Poor’s equity analyst Jim Yin also expressed his doubts saying the Wal-Mart deal is a “logical” but potentially costly move. He wrote in a May 24th research note, “While this strategic move will generate higher revenues, we believe margins will decline since sales from retail stores have lower margins.”

As an example, today we will take a bullish look at computer manufacturers Hewlett Packard (HPQ), Apple (AAPL) and Dell (DELL). This PowerOptions blog shows how the average investor might use our search tools based on their view of whether a stock will rise or fall. Whatever your personal opinion about the movement of an individual stock, PowerOptions can help you identify the most attractive trade. A bullish investor might choose a covered call investment strategy, bull call debit spreads or bull-put credit spreads. While a bearish investor might choose bear put debit spreads or bear-call credit spreads. Sign up now and try out our search engine risk-free for 14 days.

Potential Trades:
All of the following option trades have 51 days until expiration. These trades were discovered using the powerful suite of option search tools found at PowerOptions.

PowerOptions covered call Computer Manufacturers (51 days)
HPQ $45.91 HPQGV 07 JUL $45.00 $1.85 4.00% 2.20% 2.20%
AAPL $118.54 QAAGC 07 JUL $115.00 $8.30 7.00% 4.20% 4.20%
DELL $27.38 DLQGY 07 JUL $27.50 $0.90 3.30% 3.40% 3.90%
(For more details click the ticker symbol above)

HPQ – The Hewlett Packard trade involves the July $45 call option and offers 4.0% downside protection and 2.2% potential profit if the stock is above the $45 strike price at the end of the option period.

Competitors for HPQ include: Canon Inc. (CAJ), Dell Inc. (DELL), International Business Machines Corp. (IBM), Apple Computer Inc. (AAPL), BMC Software Inc. (BMC), 3Com Corp. (COMS), Cray Inc. (CRAY), Datalink Corp. (DTLK), EMC Corp. (EMC), FalconStor Software (FALC), Gateway 2000 Inc. (GTW), Lexmark Intl. Grp. Inc. Class A (LXK), Network Appliance Corp. (NTAP), Opsware Inc. (OPSW), palmOne Inc. (PALM), Sun Microsystems Inc. (SUNW), Unisys Corp. (UIS), and Xerox Corp. (XRX).
AAPL – The Apple trade involves the July $115 call option and offers 7.0% downside protection and 4.2% potential profit if the stock is above the $115 strike price at the end of the option period.

Competitors for AAPL include: Dell Inc. (DELL), Hewlett-Packard Co. (HPQ), Microsoft Corp. (MSFT), Adobe Systems Inc. (ADBE), Avid Technology Inc. (AVID), Creative Technology Limited (CREAF), DivX Inc. (DIVX), Gateway 2000 Inc. (GTW), Napster Inc. (NAPS), RealNetworks Inc. (RNWK), and Sonic Solutions (SNIC).
DELL – The Dell trade involves the July $27.50 call option and offers 3.3% downside protection and 3.9% potential profit if the stock is above the $27.50 strike price at the end of the option period.

Competitors for DELL include: Hewlett-Packard Co. (HPQ), International Business Machines Corp. (IBM), Sun Microsystems Inc. (SUNW), Apple Computer Inc. (AAPL), Best Buy Co. Inc. (BBY), Circuit City Stores Inc. (CC), Gateway 2000 Inc. (GTW), Insight Enterprises Inc. (NSIT), Neoware Systems Inc. (NWRE), and palmOne Inc. (PALM).
For more information about how to identify and research great option trades, visit the PowerOptions website. There you will find the data you need to make quick, clear, and informed decisions. You can trade knowing you have found the best investment. Also, PowerOptions will allow you, with a few quick clicks, to quickly and accurately compare trades. PowerOptions‘ premium customer support is second to none in the industry. They can be easily contacted when you need them at their toll-free number to answer customer questions. Call them now toll free at 877-992-7971.

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‘ 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] Crows Business Week, AP, Standard & Poor, Jim Yin, AAPL, Apple Computer Inc., ADBE, Adobe Systems Inc., AVID, Avid Technology Inc., BBY, Best Buy Co. Inc., BMC, BMC Software Inc., CAJ, Canon Inc., CC, Circuit City Stores Inc., COMS, 3Com Corp., CRAY, Cray Inc., CREAF, Creative Technology Limited, DELL, Dell Computer Corp., DIVX, DivX Inc., DTLK, Datalink Corp., EMC, EMC Corp., FALC, FalconStor Software, GTW, Gateway 2000 Inc., HPQ, Hewlett Packard, IBM, Intl. Business Machines, LXK, Lexmark Intl. Grp. Inc. Class A, MSFT, Microsoft Corp., NAPS, Napster Inc., NSIT, Insight Enterprises Inc., NTAP, Network Appliance Corp., NWRE, Neoware Systems Inc., OPSW, Opsware Inc., PALM, palmOne Inc., RNWK, RealNetworks Inc., SNIC, Sonic Solutions, SUNW, Sun Microsystems Inc., UIS, Unisys Corp., WMT, Wal-Mart Stores Inc., XRX, Xerox Corp., bear put debit spreads, bear-call credit spreads, bull call debit spreads, bull-put credit spreads, covered call investment strategy, investment strategy, iron condor, poweroptions, stock option trading, stock options [/tags]

Leave a Reply

Your email address will not be published. Required fields are marked *