EMC Corporation (NYSE: EMC) opened at $18.52. So far today the stock has hit a low of $18.30 and a high of $18.92. As of 10:40, EMC is trading at $18.78, up $1.06 (6.1%).EMC subsidiary VMware is scheduled to make its debut on the NYSE tomorrow in an IPO that analysts are predicting to be a smash hit. EMC will retain 90% of the shares, meaning its value could get a lift if VMware makes a splash on the exchanges. Technical indicators for EMC are bullish but deteriorating, while S&P gives the stock a very positive 5 STARS (out of 5) strong buy rating.
For a bullish hedged play on this stock, I would consider an October bull-put credit spread below the $15 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk and leverage returns. For this particular trade, we will make a 7.1% return in less than three months as long as EMC is above $15 at October expiration. EMC would have to fall by more than 20% before we would start to lose money.
EMC hasn't been below $15 since April and has shown support around $17.40 recently. This trade could be risky if the proposed bullish tech cycle never materializes or if the IPO fizzles, but this stock is one that has been basically immune to the market jitters over the past month.
Brent Archer is an options analyst and writer at Investors Observer. DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in EMC.
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Reader Comments (Page 1 of 1)
8-13-2007 @ 1:51PM
elliott said...
EMC is going to be a huge winner. It's tech platform and upcoming vmware ipo tomorrow will send emc through the roof. Don't wait for a dip,it's not coming.