Trader buys more time for Dell to rally
A large trader is buying more time for Dell to rally after shareholders vote next week on a proposed buyout by its founder.
optionMONSTER's Heat Seeker scanners detected the sale of 10,000 August 14 calls for $0.08 and, at the same time, the purchase of 10,000 February 14 calls for $0.64. Volume was below the previous open interest in the August strike but above it in the February contracts, indicating that a trader was rolling a position forward in time.
The adjustment, which cost a net $0.56, provides another six months for the strategy to work. The new long calls , which lock in the price where the stock can be bought no matter how far it might rise, are looking for DELL to close above $14 by mid-February 2014 but will expire worthless if they remain below that strike price. (See our Education section)
The stock spiked higher from about the $11 early this year on the disclosure of takeover talks involving Michael Dell and then billionaire investor Carl Icahn but have been parked at the $13.50 level since mid-April as negotiations continued.
Shares then fell 2.1 percent on Friday to close at $13.03 after dropping to $12.70 earlier in the session on news that the founder and Silver Lake Management would not raise its $24.4 billion offer to take the company private. Shareholders are scheduled to vote on the proposed acquisition on July 18.
Total option volume in the name topped 106,000 on Friday, nearly 7 times its daily average for the last month.
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