While the equities market is a public arena, it’s clear that some opinions matter more than others. This is the key reason why retail investors should — assuming availability and access — monitor options flow data for their target investments. Options flow isn’t just about aberrant trades in the derivatives market. No, instead it focuses exclusively on big block transactions likely placed by institutional investors.
Take innovation juggernaut Dell Technologies (NYSE:DELL) as an example. Thanks to the blistering rise of artificial intelligence, DELL stock has witnessed a surge in value over the past five years. Fundamentally, the underlying business offers a comprehensive portfolio of solutions, services and products, helping enterprises make the most of generative AI for increased productivity and cost reductions.
Nobody really cares if Bob down the street bought some cheap, out-the-money (OTM) Dell calls — and options flow completely ignores this noise. Instead, this screener focuses exclusively on the major transactional blocks, which involve hundreds if not thousands of contracts. Such activity may eventually move the market. Plus, if you spot the positioning in time, the trades could represent a forward signal.
According to data by Barchart, the below list represents the net trade sentiment (i.e. the flow of money in the options arena) of each day of last week:
Despite a gross blip in bearish sentiment last Wednesday, the overall net trade sentiment for the week clocked in at $775,800, favoring the bulls. Stated differently, the smart money may be anticipating a large swing higher. Retail investors who have high conviction in this outcome could get ahead of the possible wave with bullish exposure to DELL stock.
Another catalyst that may entice traders to consider DELL stock is its technical formation. From early 2024 to the present juncture, DELL stock appears to have formed a bullish pennant formation. To be fair, I’ve mentioned this pattern in other financial publications and quite frankly, the implications of the bull pennant has not yet panned out.
Still, the pattern is flashing, meaning that its shape doesn’t appear yet to be compromised. If you still want a crack at a potential tech recovery play, DELL stock is incredibly tempting. After all, in late May of last year, the equity closed above $179.
Moreover, the biggest options trade with bullish implications was actually a sold put; specifically, the $80 put with an expiration date of July 18, 2025. At the time of the transaction, the premium received (or the bid) stood at $3.10. Subtracting this figure from the strike price gives us $76.90, the price at which put sellers are comfortable buying DELL stock.
Recall that put holders have the right but not the obligation to sell the underlying security at the strike price. In contrast, put sellers must honor this right under assignment. For such folks, $76.90 is the price at which DELL stock becomes a can’t-miss opportunity.
At the same time, the sold puts imply that DELL might not decline much from here. With that in mind, speculators could decide to take a potshot here.
