Bulls Go Bottom-Fishing in Dell

By David Russell, reporter at OptionMonster

NEW YORK -- Investors are trying to call a bottom in Dell (DELL).

For the second time in a week, OptionMonster's tracking programs detected unusual call volume in the beaten-down computer maker. Thursday activity focused on the January 2015 12 calls, with a block of 6,500 contracts purchased for $1.02.

The investor has now locked in an entry price on Dell for the next 14 months. The long calls stand to generate big profits if the stock rallies, but the options will also become worthless if it doesn't move.

Shares rose after the calls hit in Thursday's session, ending the day up 2.94% to $9.45. The stock is now attempting to bounce at its lowest level since March 2009.

Nov. 2, traders bought the February 10s for 36 cents. Those contracts have now inflated to 44 cents, which shows the kind of leverage that can be generated with options.

More than 35,000 contracts traded in the name Thursday, triple its daily average. Calls outnumbered puts by more than 2 to 1, and the puts that traded were mostly sold. That reflects a willingness to own shares not far below their current levels, another bullish sign.

Russell has no positions in DELL.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.