Although I have lost a lot, is there any strategy left which I can use to minimize my losses.
Depending on your tolerance for loss, you could use the well known, though far from universally recommended approach of averaging down your position. At a price of 9/16 (current) on the ask, you could double your position leaving your basis at 1_25/32, or you could just leave your current position open with some expectation of at least a partial recovery. Then of course you could hit the 7/16 bid, accept your loss and move on with what you have left, or take a more aggressive position buying some June 40s that will more closely follow DELLS price movement. Without recommending what YOU should do, I can tell you that if it were me I'd at least leave the position open and risk losing it all because I see far more upside potential from here than additional loss.
I'm sure you have read Herm's reply noting the indicators that suggested your initial entry lacked support, but if you look at the charts today things are looking a lot brighter. Dell took a hit for failing to beat estimates, but is the magnitude of the pull back justified, or is DELL now in an oversold condition? It's now sitting on the lower BB, on balance volume is in the region of recent upturns, RSI is not quite as low as it might go, but yesterday DELL bounced off its 200 day moving average, with strong volume, and was pretty steady compared to the Nasdaq 100 index.
In deciding where to go from here, you need to ask yourself what you would do now if you were not already in the June45s, because that's what the rest of the people out there who follow DELL and have some cash are doing. If they decide it's a buy at these levels, it will come back. Could DELL run to near $45, pulling the June45s along faster than the time premium will decay? I don't see anything to rule out that possibility. The upper BB is at about 46 and will creep higher if DELL rises. Every top in the last few months has been at 45 or above, and the last several uptrends have lasted between 5 and 10 days, so there is plenty of time for a recovery. The "bad" news is out and the reaction has followed, so is there much downside potential? Was the bounce off the 200 day moving average the real bottom, or is there a bit more to go? Weigh all of that against what you think is going to happen in the market generally and in the computer sector over the next several days, and good luck.
Herm,
One of your posts looking at DELL now that it has pulled back would be appreciated.
Dan |
