Shares of Dell are rapidly closing in on 52-week highs after surging more than 16% in the month of November. Options traders are betting the stock’s monster moves aren’t over yet, either, and some see the company breaking out in a big way when it reports earnings after the bell Tuesday.
“Calls outpaced puts [by a ratio of] 2-to-1, but what we’re also seeing is that the options volume was twice what we’ve seen over the longer term, so quite a few entrants today,” Bonawyn Eison, managing director of equity derivatives at XP Investments, said Monday on CNBC’s “Fast Money.”
It wasn’t just volume that was eye-catching, though. Traders were using options to make bets that Dell is about make a huge post-earnings move.
“Taking a look at the average move, 7% [in either direction], that’s what we see on earnings, compare that to a 9% move derived from the implied options in either direction between now and December [expiration],” said Eison.
Much of Monday’s activity included trades betting that Dell would end up on the bullish side of that implied move rather than the bearish, meaning that a new 52-week high may be well within sight.
“The trade that really jumped out to me was the December 70-calls,” said Eison. “Those were sold at $2.75, capping your upside at 105% [of the current price]. So they’re really saying, listen, we’ve seen a lot of companies come out, blow earnings off the doors, and trade off, and they’re expecting that trend to continue.”
While these traders would get their position in Dell called away from them at $72.75, that price point is more than $1 higher than the stock’s current 52-week intraday high of $71.45, which it hit just last month. This means that these traders may be able to collect premium and also hang onto their position in the name.
Dell was trading about 1% higher in Tuesday’s session.
