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Saturday, December 2, 2023

Big Bearish Bet on Dell Pops Up Ahead of Earnings After the Close

Today’s tickers: DELL, AKAM, NWL & EEM

DELL – Dell, Inc. – Bearish sentiment on the personal computer maker is building in options land this afternoon ahead of Dell’s fourth-quarter earnings report after the final bell. Shares in the tech company are currently down 1.5% to stand at $13.88 just after 12:30pm in New York. One big options strategist is well-positioned to benefit from limited downside movement in the price of the underlying shares through March expiration. The investor purchased a massive put spread, picking up 25,000 lots at the March $13 strike for a premium of $0.24 each, and selling the same number of puts at the lower March $12 strike at a premium of $0.08 apiece. Net premium paid to initiate the pessimistic play amounts to $0.16 per contract. The trader starts to make money in the event that Dell’s shares drop 7.5% from the current price of $13.88 to breach the effective breakeven point on the spread at $12.84 ahead of expiration day. Maximum potential profits of $0.84 per contract are available to the put player should shares in the name plunge 13.5% lower to trade below $12.00 in the time remaining to March expiration. Dell, Inc. options are popular ahead of earnings, with more than 137,000 contracts having changed hands in early-afternoon trade. Options implied volatility is up slightly by 3.0% to stand at 36.29% as of 12:40pm.

AKAM – Akamai Technologies, Inc. – A three-legged bullish options combination play on the provider of cloud optimization services caught our eye this morning. The strategist responsible for the transaction is positioning for Akamai’s shares to continue to rise ahead of March expiration. Shares in AKAM are currently up 1.2% at $42.60 just before 11:30am in New York. The stock took a big hit last week, falling as much as 19.0% to a six-month low of $39.90, following the firm’s fourth-quarter earnings report. But, some investors appear to be positioning for the price of the underlying to rebound in the near future. The three-legged bull picked sold around 1,000 puts at the March $39 strike for an average premium of $0.76 apiece, purchased the same number of calls at the higher March $43 strike at an average premium of $1.74 per contract, and sold roughly 1,000 calls up at the March $49 strike for an average premium of $0.34 each. The net cost of putting on the spread amounts to $0.64 per contract. Thus, the trader is poised to profit should Akamai’s shares rally another 2.4% to surpass the average breakeven point on the upside at $43.64 ahead of March expiration. Maximum potential profits of $5.36 per contract are available to the investor if the price of the underlying soars 15.0% higher to exceed $49.00 before the options expire next month.

NWL – Newell Rubbermaid, Inc. – The consumer products maker popped up on our ‘hot by options volume’ market scanner today due to bullish activity in March contract call options. Shares in Newell Rubbermaid are presently trading 0.35% lower on the session at $19.86 just after 12:40pm. More than 7,150 calls changed hands at the March $20 strike on paltry previously existing open interest of just 528 contracts. It looks like majority, or approximately 6,300 of the call options, were purchased for an average premium of $0.45 a-pop by bulls expecting NWL shares to hit a new 52-week high by March expiration. Investors buying calls on the marketer of a portfolio of well-known brands, including Sharpie and Paper Mate, are prepared to make money in the event that Rubbermaid’s shares rally 3.0% over the current price of $19.86 to surpass the average breakeven point on the upside at $20.45 ahead of expiration day next month. Newell Rubbermaid’s shares last traded above $20.45 back in September of 2008. The rise in demand for call options on the stock helped lift NWL’s overall reading of options implied volatility 12.3% this afternoon to 25.70% as of 12:50pm.

EEM – iShares MSCI Emerging Markets Index ETF – Activity in longer-dated call options on the emerging markets fund this morning appear to be the work of an investor taking profits on, and extending, a previously established bearish bet in the ETF. Shares in the EEM, an exchange-traded fund that corresponds to the price and yield performance of publicly traded securities in global emerging markets, as measured by the MSCI Emerging Markets Index, parsed earlier losses to stand 0.15% higher on the session at $45.47 by 11:50am. It looks like the trader’s original position represented a ceiling of sorts, a bet that shares in the fund would not spike above $55.00 by June expiration. The purchase of 22,500 calls at the June $55 strike for an average premium of $0.085 this morning likely represents the closing purchase of a short stance in those contracts created back on January 5, 2011, and December 9, 2010. The calls may have been sold at around $0.49 each on December 9th and approximately $0.65 apiece on January 5th. Under those parameters, the investor rolls out of the position with decent returns. Next, the sale of two equal-sized blocks of calls in the September contract appear to be an extension of doubt that the price of the fund’s shares will jump to new heights in the next seven months to expiration. It looks like the trader sold 11,250 calls at the September $53 strike for a premium of $0.64 each, and sold another 11,250 calls at the higher September $54 strike at a premium of $0.47 apiece. Premium pocketed on the transaction amounts to $1.11 per contract. The investor keeps the entire premium received as long as shares in the EEM fail to rally above the strike prices as indicated. However, if these calls are uncovered, the trader faces losses on the positions if shares rise above and beyond the strike prices plus the premium received for bearing such risk.

Andrew Wilkinson

Senior Market Analyst


Caitlin Duffy

Equity Options Analyst



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