July Options
Dennis:
I am thinking about buying naked calls. I looked at the premiums, and the 100s seems like a deal. I am also thinking about selling puts-- July 95s.
First the mandatory disclaimer... I am not in any way licensed or trained to advise on security or option trades. I am not certified (though my 19-year-old son says I am certifiable <g>) in any manner or by any authority. So my advice is opinion only.... You get what you pay for... <g>
I would not buy the July 100 calls, except as a pure speculative (gambling) play. They may prove a very profitable investment, but you only have 22 days for DELL to go up strongly. I do think that DELL will move up heading into the shareholders' meeting, but whether it will move that strongly, I don't care to guess.
I think selling the naked July 95 puts is potentially much more lucrative, though this action entails a LOT more risk. If the market crashes and DELL goes down to Hank's 30, you end up paying about 87 for it anyway, for a $57 loss.
However, you have two ways to win here: the puts are currently trading about 8 1/2, so you win if DELL closes on 19 July anywhere above (95 - 8 1/2 = ~) 87.
Furthermore, even if DELL closes somewhat below 87 for a loss on that trade, you will be holding DELL looking at a strong upward potential into the August earnings and possible split announcement.
On that basis, FWIW, I have sold six of the July 95 puts. For me, ideally, DELL would close at 94 and I would graciously accept the forced trade.
Regards, 3. |
