5.9 C
New York
Friday, March 29, 2024

Channel Checkers & Phil – two easy option trades

Last week, we followed two successful trades (TGT and GME) based on Jason’s Channel Checking information and Phil’s option-strategy design expertise. This week, we have two more option trade recommendations – a bullish trade on DELL, and a flat-lining bet on PALM. – Ilene  

Positive – DELL 

Dell Selling Well at Retail, Pricing May be Key.
Ticker: DELL
Questions We Asked:
1. How well is Dell selling compared to other brands?
2. What is the top selling Brand right now? 
3. What is the top selling model from the top selling brand?
  • 73% of respondents stated that Dell computers were selling better than other brands sold at their store location.
  • 60% said that Dell was the top brand right now, 27% said that HP was the top brand and 13% said that Sony was the top selling brand.
  • The Dell Inspiron was the top model according to 40% of respondents the HP Pavillion was tops according to 20%, while the Dell XPS and Sony VAIO were tops according to 10% each.
Conclusion of Channel Check:  The survey shows that Dell computers remain well thought of at least in the consumer electronics retail space. Our survey does not capture corporate or on-line sales but gives some indication to preferences among brands. We did not see notebooks mentioned in this survey, but the incidence of those models might be indicative of the strength (or lack of strength) of the notebook trend. Overall the survey reflects positively on Dell’s sales via the consumer retail channel.
Catalyst for stock movement:
DELL Reports Earnings on 5/28/09

How would Phil play it? 

DELL – This is a tough one as selling computers does not always equate to making money on computers but let’s assume Dell is big enough to have put a big squeeze on their suppliers and shipping costs, which will have played in their favor as well.  My favorite play on Dell would be the simple July $10 calls for $1.55, which have just a .41-cent premium, fairly low if Dell does indeed take off.  A more conservative approach would be to buy Nov $11 calls for $1.60 and sell the Nov $12 calls for $1.15, which is a net of .45 and will make .55 (122%) if Dell is good enough to finish at $12 in November.  The nice thing about this trade is that the expected loss is limited if it goes the wrong way as the spread between the Nov $13 and $14 calls is still .25 so a 20% drop in Dell could, theoretically, still leave us with more than half of our investment.  In theory, we are risking .25 to make .55 – a good risk/reward proposition.

Negative – PALM

Sprint Reps Recommend Samsung Devices over Palm in the face of “Pre” launch..

Ticker: PALM

Questions We Asked:
1. Can I come down and get a Palm Pre today (or Pre-order one)?
2. Are you sold out of the Pre? 
3. What is the best selling phone model at Sprint now?
4. What is the best e-mail device at Sprint to get? 
5. What is the best device to get at Sprint for music?
6. Has there been increase in people upgrading their phones or opening new accounts in the past month?
  • 60% of respondents at Sprint stores said that it was possible to come down and place a pre-order for the Palm Pre. 40% said you could not.
  • 100% of respondents said they were not “sold out” of the Palm Pre. We asked this question to get an early lead on sell-outs, delays or difficulty in getting units based on demand.
  • 27% of respondents stated that the Samsung Instinct was the top selling device.
  • 23% said it was the Blackberry Curve. 10% said the LG Rumour was the top seller and 75 said the LG Lotus.
  • 60% of respondents cited some Blackberry model as the best device for e-mail. The Samsung Instinct was identified as the top e-mail device by 10%.
  • 28% cited the Samsung Instinct at the top device to get for music as the primary application. The Samsung Highnote was seen as the top device for music by 20% of respondents.
  • 73% of respondents said they are seeing increases in upgraded phones or new account openings in the past month compared to the previous month. 
Conclusion of Channel Check:  It looks to us like the Palm Pre’s will be available despite expectations for sell outs by Sprint management. The lack of aggressive recommendation of the coming Pre by Sprint reps also suggests they are happy to sell existing devices and do not see the “Pre” as a category dominating device. Palm’s existing phones are nowhere to be found on the Sprint stores reps recommendation list which seems problematic.
Catalyst for stock movement:
Palm Pre is launched at Sprint on 6/6/09.

Phil’s recommendation:

PALM – As this is not earnings related we are really playing for a non-event on the Pre.  My concern is that the actual roll-out is still 2 weeks away and we can’t rule out the possibility that Sprint will conduct a well-coordinated marketing effort between now and then.  PALM gained 10% today and was 10% higher than this last Tuesday.  With good support at $10 we can take advantage of PALM’s huge premiums to SELL the $11 calls at $1.05 and the $12 puts at $1.50.  We are collecting $2.55 and our window of profit is anything under $13.55 on June 19th as long as it’s not lower than $9.45.  Max profit on this trade would come at anywhere between $11 and $12 where we would owe a total of $1 back to the caller and putter so we root for a flatline.

 

Subscribe
Notify of
0 Comments
Inline Feedbacks
View all comments

Stay Connected

157,450FansLike
396,312FollowersFollow
2,280SubscribersSubscribe

Latest Articles

0
Would love your thoughts, please comment.x
()
x