Dell Technologies (DELL) is holding nicely above rising 21, 50 and 200-day moving averages and is a highly rated stock among many analysts.
Today, we are looking at an unbalanced iron condor, with a slightly bullish bias.
This can be achieved by trading more put spreads than call spreads.
As a reminder, an iron condor is a combination of a bull put spread and a bear call spread.
First, we take the bull put spreads. Using the April 17 expiry, we could sell two put spreads with the $165-$160 strike prices. That spread could be sold for around $0.85. Selling two contracts would generate $170.
Then the bear call spread, which could be placed by selling the $215 call and buying the $220 call. This spread could also be sold for around $0.40.
Trading two put spreads for every one call spread gives the trade a slight bullish bias, but also more risk on the downside.
In total, the iron condor will generate around $2.10 or $210 of premium.
The profit zone ranges between $163.90 and $217.10. This can be calculated by taking the short strikes and adding or subtracting the premium received.
The maximum risk is $790 on the put side and $290 on the call side.
If we take the premium ($210) divided by the maximum risk ($790), this iron condor trade has the potential to return 27%.
A stop loss in this case might be calculated based on 25% of capital at risk, so a loss of around $195-$200.
Below you can see the risk graph showing the profit and loss at expiration and also the T+0 line.
Company Details
The Barchart Technical Opinion rating is a 40% Buy with a Strengthening short term outlook on maintaining the current direction.
Relative Strength is above 70%. The market is in overbought territory. Watch for a potential trend reversal.
Of the 23 analysts covering DELL stock, 15 have a Strong Buy rating, 2 have a Moderate Buy rating, 5 have a Hold rating and 1 has a Strong Sell rating.
Dell Technologies Inc. is a provider of information technology solutions.
The company's operating segment consists of Client Solutions, Enterprise Solutions Group and Dell Software Group.
Client Solutions segment includes sales to commercial and consumer customers of desktops, thin client products, notebooks as well as services and third-party software and peripherals of Client Solutions hardware.
ESG segment includes servers, networking and storage as well as services and third-party software and peripherals of ESG hardware.
DSG segment includes systems management, security software solutions and information management software offerings.
Dell Technologies Inc. is headquartered in Round Rock, Texas.
Summary
Unbalanced Condors are a great way to play a neutral to slightly bullish outlook on a stock.
Please remember that options are risky, and investors can lose 100% of their investment.
This article is for education purposes only and not a trade recommendation. Remember to always do your own due diligence and consult your financial advisor before making any investment decisions.
On the date of publication, Gavin McMaster did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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