GET A LOAD OF THIS! Closing FOUR for 4500%, 2133%, 800%, & 247% and TRADING DELL (DELL, IYT, OSK, DIA, BLMN)

Today’s letter is FREE in honor of the holiday.

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Important Note For Subscribers:

The holy convocation of SUKKOT falls next week (October 1-7), so we will be publishing just once over that period.

A Jew and His Money should arrive either Tuesday or Wednesday instead of her normally scheduled Monday appearance. 

The following week will see us back on our regular schedule.

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Dell Technologies, Inc. (NYSE:DELL) makes computers and other digital accessories.

But on the New York Stock exchange they’re known for something completely unrelated.

And what, pray tell, might that be?

Well, it’s what’s known in the business as momentum, an ephemeral attribute that gets hearts racing, wallets opening, and—sadly—in the end, toilets flushing.

In any event, before we get to today’s DELL-o-rama ding-dong, we have several to close for full cash.

And by that, we mean money.

So here goes…

We start with our IYT initiative, whose details can be found HERE.

To sum, we’re in possession of a $3.10 credit and the October 20^th 235 synthetic short.

And…

The short CALL can now be repurchased for $3.40 while the long PUT is sold for $7.20.

Get it done and you exit with an unfathomable $6.90 on NOTHING expended.

Adjusted for minimal commissions gives you a hometown hero 4500%.

Hero Sandwiches All Round!

Take the gang out for a treat, daddy-o.

We now move to our OSK trade from a missive entitled Wanna See What a Couple of 8000% Wins Look Like?  It arrived on August 9^th and urged you to sell the OSK October 20^th 110/115 CALL spread for $1.05 and buy the OSK October 20^th 95/90 PUT spread for $1.05.  Net Zero Premium was the result.

And now…?

The PUT spread can be closed for a healthy $1.35 (2.35/1.00), and the CALL spread can be left to wither.  It’s a looooong way out-of-the-money.

We’re going to book this as a win, even though there’s time left ‘til expiry.

And it’s a nice one.

Adjusted for minimal commissions makes it a round, chubby 800%.

We’ll keep an eye and inform you if action needs be taken.

NEXT!

The particulars of our DIA bet can be dug up HERE.

In brief, we’re holding the December 15^th 340 synthetic short and a credit of $3.20.

And whaddaya know—the short CALL can be repurchased for $8.90 while the PUT can be offloaded for $9.05.

Do it and you shake the foundations for a mighty $3.35 on nothing spent!

Adjusted for minimal commissions makes for a handy 2133%.

Finally, we arrive at our BLMN initiative, whose details can be had HERE.

To sum, we’ve a debit of $0.53 and are holding the October 20^th 25 synthetic short.

And…?

We’re buying back the CALL and selling the PUT for a credit of $1.05 (0.50/1.55).

That puts $0.52 NET in our pockets—on zilch originally laid out—and gives us bragging rights to a 247% profit (accounting for minimal commissions).

That’s a good day.

AND NOW WE TRADE ANEW…

Back to the matter at hand.

We’re jumping right into DELL’s fundamentals because there’s no time for idle talk.

• Current P/E is 27.12, but analyst consensus is for that number to shrink to just 10.25 by this time next year.  And that doesn’t bode well.
• Dividend Yield is 2.12%, which is fine, but…
• The stock has no Book Value.  I.e., liabilities exceed assets.
• Beyond that, EPS this year DECLINED by 16.73%,
• Q/Q sales DECLINED by 11.95%, and…
• Q/Q EPS DECLINED by 7.51%.
• So, why, you may ask, did the stock pop by better than 20% on the release of earnings at the end of August?
• Best ask insiders, who sold $438 million worth of stock in the last six months—$417 million of which was withdrawn in just the last 60 days.

DELL “beat” on both earnings and revenue, but as the numbers above show, she’s still not at the level she commanded a year ago.

So why all the fanfare (as seen on the chart below)?

Well, it appears someone mentioned the term “AI” on the earnings call, and—as you know—that’s all it takes nowadays.

According to the Wall Street Journal—

The company said demand for products that help businesses use artificial intelligence is a “long-term tailwind.”

Right…

Translation?

Whatever the hell you want it to mean, just buy the damn stock.

Here’s the chart—

Technicals are like this…

1. First, RSI went overbought on the AI-induced drunkfest that followed earnings (in green).
2. MACD subsequently rolled over, and
3. Both indicators have diverged sharply from price ever since (green arrows).  This is indicative of a changing of the guard, from bulls to bears, and an almost certain interim top for the stock.
4. A six month rally of close to 100% (!) appears now to be drawing to a close…
5. As a massive gap through 56 requires closing (in blue), and…
6. The long-term moving averages, too long abandoned, require some serious TLC (in purple).
7. We see the stock returning to at least long-term support at the rising trendline (in red), a level that also aligns with a closing of the aforementioned gap at 56.

And we’re trading it thus—

A Jew and His Gold recommends you consider selling the DELL February 16^th 65/67.50 CALL spread* for a credit of $1.30 (8.30/7.00) and buying the DELL February 16^th 70/67.50 PUT spread** for $1.40 (6.00/4.60).  Total debit on the trade is $0.10.

[*Sell the 65 CALL and buy the 67.50 CALL.  **Buy the 70 PUT and sell the 67.50 PUT.]

Rationale: the pick-up here is a potential $2.40 on $0.10 spent (2400%), while the downside is $2.60 (difference between the CALL strikes plus the initial debit).

Breakeven is $67.40, just 2.2% below the current price.

The full haul of 2400% is scooped on a decline of just 5.7%.

Those are good numbers.

And a February expiry offers plenty of time to get there.

Chag Sameach!

And many happy returns!

Matt McAbby

Follow @HughLOHaynew