Dell Technologies, Inc. (DELL) is trending in news and social media after the news broke that DELL is a partner in Elon Musk’s future AI factory (see the headline below). The stock gained $7.12 or 5%
Tuesday after this news became public. As of this writing the stock is up another $5.25 or 3.5% in preopen trading this morning.

This MDM graph compares the modeled expectations of current options prices (the orange line) to the actual movement of DELL’s stock price over the past two years. You can see that the actual behavior (the blue histogram) did not make big moves as often as the modeled options prices expect. This graph tells us the DELL options expiring tomorrow are expensive. I want to point out those tails on either end of this graph. Those tail moves tell us that we need to be cautious when selling options on DELL. We have a high-probability trade idea today, but the probability is not 100% so be careful in your allocation.

This Volatility Term Structure chart is showing us that volatility expectations for tomorrow’s expiration are relatively high. To learn more about Volatility Term Structure, click here. Something interesting about DELL and other AI stocks is that they tend to behave differently than other stocks. Typically, when good news comes out and a stock price moves up, implied volatility tends to decrease. DELL and other AI stocks don’t behave that way. When these stocks have good news, the demand for options tends to increase and implied volatility tends to rise higher. This tendency may help us to get filled this morning on our trade idea.

DELL is trending in news and social media after a news event started driving the stock price higher. Demand for DELL options is increasing and driving the options prices and implied volatility higher as well. With the cost of options rising, we can use a high-probability credit spread strategy to take advantage of the current situation.

Be sure to read the ODDS Online Daily Trade Idea report to get the details of our trade idea using DELL options today.

To access Odds Online Daily and be able to see any stock you are tracking in this software, click here.

Thank you,

Don Fishback