Analyst: Personal Computer Market Has Hit a Bottom

Options bulls are blasting the security in response

Deputy Editor
May 2, 2023 at 10:06 AM
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Dell Technologies Inc (NYSE:DELL) is up 3.3% at $45.30 this morning after Morgan Stanley upgraded it to "overweight" from "equal weight," saying the personal computer market is bottoming out. The Wall Street analyst also hiked its price target to $55 from $45.

Coming into today, the majority of covering brokerages were already bullish on Dell Technologies stock, with nine of 12 rating it a "buy" or better. Meanwhile, the average 12-month target price of $47.86 is a 5.7% premium to DELL's current perch.

The equity's typically quiet options pits are seeing an increase in call activity in response to the bull note. Within the first half hour of trading, 2,640 bullish bets have crossed the tape, or three times the average intraday volume. The weekly 5/5 45-strike call is the most popular contract, and new positions are being opened there. 

A broader look shows the options pits have been optimistic for a while. Over at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), 2.55 calls have been picked up for every put in the past 10 weeks. This ratio stands higher than all other readings from the last year, indicating a ravenous appetite for calls of late. 

Now looks like a good time to weigh in on the security's next move with options, given Dell stock is seeing attractively priced premiums at the moment. This is per the equity's Schaeffer's Volatility Index (SVI) of 28%, which stands in the 10th percentile of its annual range. What's more, DELL's Schaeffer's Volatility Scorecard (SVS) sits at a relatively high 86 out of 100. In other words, the security has exceeded options traders' volatility expectations over the past year.

On the charts, the security is looking to reclaim its April 18 annual high of $45.65. A pullback from that level was caught by DELL's 260-day moving average, while today's pop has put it back above its 320-day trendline. Year-to-date, Dell stock is up 12.5%.


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