Options traders active in stock’s AI rally

  • DELL up more than 70% since the end of March
  • Shares hit record high after last week’s earnings
  • Put volume elevated in October expiration

Dell’s (DELL) appearance on Wednesday’s scan for unusual put options volume didn’t appear particularly noteworthy, in and of itself. With put volume around three times average in early trading, DELL was far from the top of the list.

But that activity may have had a different look to it in the context of what unfolded over the previous two days. Around noon ET on Tuesday, DELL’s call volume was around 4.32 times average, but its put volume was 11 times average, and on its way to being 15 times average. The most notable trade was 2,800 contracts in the October $70 puts, which were mostly in the money on Tuesday (the stock closed at $68.10). On Wednesday, open interest in the contract was exactly 2,800:

Chart 1: Dell (DELL) October puts, 9/6/23. Dell (DELL) options chain. Big increase in October ATM put positions.

Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)

This flurry of options activity came on the heels of a record-setting day for the stock: Dell closed up more than 21% last Friday (September 1) after releasing earnings late Thursday. Not only did the company top its numbers, it also upped its forward guidance, citing potential tailwinds from its artificial intelligence efforts, which include AI-dedicated servers and a partnership with Nvidia (NVDA).1

Friday was the biggest up day in the stock’s history, propelling it to a new all-time high—one that was, in fact, a little above the average Street analyst price target of $67.36.2 After closing slightly lower on Tuesday, DELL climbed more than 2% intraday on Wednesday:

Chart 2: Dell (DELL), 6/20/23–9/6/23. Dell (DELL) price chart. Gapped to record high after earnings.

Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)

A monthly chart shows that, as of Wednesday, the recent surge was still the exclamation point of the stock’s 70%-plus rally since March 31 (more than 100% since October 31):

Chart 3: Dell (DELL), 12/3/18–9/6/23 (monthly). Dell (DELL) price chart. Up more than 70% since March.

Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)

As always, it’s impossible to know whether the trader (or traders) who initiated Wednesday’s big position in the October $70 puts was buying them to capitalize on an expected down move, shorting them to profit from an anticipated rally, hedging an underlying stock position, or whether they were part of a larger, more complex position.

Even the strongest and longest-lasting trends experience pauses and setbacks. Dell traders will be in the process of gauging whether the stock’s upside momentum is—at least between now and the October options expiration—likely to maintain the pace it set over the past few months.

Market Mover Update: Huntsman (HUN), a chemical company with average daily put volume of 98, topped Wednesday’s LiveAction scan for high put volume. More than 11,000 contracts traded hands, including 9,600 October $25 puts and 1,500 October $26 puts. The stock closed at a two-month low after a sharp, two-day pullback.

Today’s numbers include (all times ET): Weekly jobless claims (8:30 a.m.), Productivity and Costs (8:30 a.m.), Quarterly Services Survey (10 a.m.), EIA Natural Gas Report (10:30 a.m.), EIA Petroleum Status Report (11 a.m.).

Today’s earnings include: Designer Brands (DBI), G-III Apparel (GIII), Science Applications (SAIC), DocuSign (DOCU), Limoneira (LMNR), National Beverage (FIZZ).


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1 Reuters. Dell raises full-year forecasts on AI strength, demand recovery. 8/31/23.
2 TipRanks. Dell Technologies (DELL) Stock Forecast & Price Target. 9/7/23.

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