Puts show negative sentiment in Dell
David Russell | email@example.com
optionMONSTER's tracking systems detected the purchase of 10,000 June 15 puts for $0.50 and the sale of an equal number of June 14 puts for $0.23, resulting in a cost of $0.27. Volume was below open interest in the 15s but not the 14s, so there are two possible interpretations of the activity.
One is that both legs were opening new positions. In that case, this would be a bearish put spread that would earn a maximum profit of 270 percent if DELL closes at or below $14 on expiration.
The second possibility is that the investor had previously sold the June 15 puts, looking for the computer maker to hold its ground. But now the trader thinks that it might push down through $15, so he or she rolled the position lower to avoid being assigned shares at that level. (See our Education section for more on put selling.)
DELL declined 2.12 percent yesterday to close at $15.02. The PC maker began the year with a rally but issued a weak earnings report on Feb. 21 after hard-drive shortages slowed computer production. The shares have lost 17 percent of their value since that news came out.
The company's next quarterly report is scheduled for after the bell next Tuesday, May 22.
Overall option volume in the name was nearly quadruple the daily average, with puts accounting for more than three-quarters of the activity.