Dell (DELL) PriceWatch Alert Could Hit 22.06% Return

Posted on Thursday, June 26, 2008 8:07 AM

Dell (NasdaqNM: DELL) closed yesterday at $23.55. So far the stock has hit a 52-week low of $18.13 and 52-week high of $30.77. Dell stock has been showing support around 22.76 and resistance in the 24.24 range. Technical indicators for the stock are Bullish and S&P gives DELL a positive 4 STAR (out of 5) buy rating. DELL appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Feb '09 24 covered call (DLQ BB) for a net debit in the $20.96 area. That is also the break even stock price for this trade. This covered call has a 240 day duration, provides 11.00% downside protection and a 14.50% assigned return rate for a 22.06% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the DELL Jan '09 22.50 Call (DLQ AX) and selling the Feb '09 24 call (DLQ BB) for a $0.61 debit. The trade has a 240 day life and would provide 1.87% downside protection and a 145.90% assigned return rate for a 222.00% annualized return rate (for comparison purposes only). Dell does not pay dividends at this time. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]