Take Dell Profits

Reduce Downside Exposure by Closing Off Dell

By Bryan Bottarelli
Wednesday, April 26, 2006 12:58 PM EST
Wed, 26 Apr 2006 17:58:00 GMT

PLAY: Sell the DELL June 30 Puts (DLQ RF) at or above $3.90, good for the day.

Dear Bottarelli Research Member,

I’ve received a plethora of questions regarding the Dell June 30 Puts (DLQ RF). On a whole, the concern is that Dell has established a bottom and will rise from current levels — filling the downside gap between $27.50 and $28.00.

Will this move eventually happen? Yes, it’s very likely that it will. But right now, the underlying trend in the stock is decisively down. This is exhibited clearly today, as the overall markets are in rally mode while Dell stock is down another $0.40. To me, this shows just how weak the stock really is. Just look at the chart:

DELL

Having said that, it’s probably a wise move to take our money off the table. We entered the Dell June 30 Puts (DLQ RF) for $3.50 on Monday, and they currently trade for $3.90. That’s a solid 11% gainer in less than three trading days.Like I mentioned before, I consider both the Dell puts and the SPY puts portfolio protection. Given the continued strength of the markets, I’d like to reduce our level of downside protection. That means I’d like to continue holding the SPY puts — and take the Dell profits off the table now.

PLAY: Sell the DELL June 30 Puts (DLQ RF) at or above $3.90, good for the day.

I’ll be out later today with a full position update — including the apparent bounce-back of FCL.

Lock and load

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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