Dell (DELL) PriceWatch Alert Up To 11.19% Downside Protection

Posted on Friday, June 27, 2008 8:07 AM

Dell (NasdaqNM: DELL) closed yesterday at $22.52. 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 22.04 and resistance in the 23.48 range. Technical indicators for the stock are Neutral 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 23 covered call (DLQ BW) for a net debit in the $20.00 area. That is also the break even stock price for this trade. This covered call has a 239 day duration, provides 11.19% downside protection and a 15.00% assigned return rate for a 22.91% 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 23 call (DLQ BW) for a $0.08 debit. The trade has a 239 day life and would provide no downside protection and a 525.00% assigned return rate for an 802.00% 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]