Options Intelligence Report: Dell, Inc. (DELL) & Hertz Global Holdings, Inc. (HTZ)
Pessimistic Players Peruse Dell, Inc. Options
DELL ñ Dell, Inc.
Shares of the worldís third-largest personal computer maker fell as much as 3.5% this morning to touch an intraday low of $11.69 after analysts at Morgan Stanley, citing global PC weakness due to tablet competition, cut their rating on Dell to ëunderweightí from ëequal-weight.í One bearish options trader is positioning for shares to head lower ahead of October expiration, but does not appear to expect the stock to collapse any time soon.
The investor initiated a ratio put spread, buying 4,100 now in-the-money puts at the October $12 strike at a premium of $0.55 each, and selling 8,200 puts at the lower October $11 strike for a premium of $0.21 apiece. Net premium paid to establish the ratio spread amounts to $0.13 per contract. Thus, the bearish player is poised to profit should Dellís shares slip beneath the effective breakeven price of $11.87 by expiration day next month. Maximum potential profits of $0.87 per contract are available should shares shed another 8.00% to settle at $11.00 at expiration. In order to attain maximum profits on the position, shares of the underlying stock must fall through the current 52-week low of $11.34, set on August 24, 2010.
HTZ ñ Hertz Global Holdings, Inc.
Bullish options traders are loading up on Hertz Global call options this morning to position for a substantial medium-term rally in the price of the underlying shares. The second-largest U.S. car rental companyís shares rallied 3.05% in the first half of the trading session to secure an intraday high of $10.11.
Share price appreciation today follows reports Thursday that a request by investors in Dollar Thrifty Automotive Group, Inc., Hertzís $1 billion proposed takeover target, to stop a September 16 shareholder vote regarding the sale of the company to Hertz was rejected by a Delaware judge. Dollar Thrifty shareholders sought an injunction in order to reconsider a competing bid from Avis Budget Group, Inc.
Bullish options players, perhaps emboldened by the judgeís decision, flocked to Hertz in morning trading to prepare for shares to head higher in the remainder of 2010. Investors purchased at least 12,200 calls at the December $12.5 strike for an average premium of $0.57 each. Call buyers stand ready to make money should HTZ shares surge 29.3% in the next several months to exceed the average breakeven price of $13.07 by December expiration. Hertzís shares last traded above $13.07 back on May 13, 2010.
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