Call Options or Put Options On EMC?

| July 2, 2012 | 0 Comments

EMC develops, delivers, and supports the information and virtual infrastructure technologies and solutions.

In essence, the technologies they make are the backbone of cloud computing.  And cloud computing is one the biggest trends in tech right now.


Put simply, the cloud is a more efficient and less expensive way to manage and use technology.  And businesses around the globe are pouring billions of dollars into cloud computing technologies every year.

EMC currently trades for $25.50 per share.  It’s up more than 27% from the 52-week low of $19.84.  But it’s recently fallen 15% from its 52-week of $30.00.

Is this an opportunity to buy call options on EMC (EMC) as it races back to its recent highs?  Or should you buy put options on EMC as it falls back to its 52-week low?

The bulls make a convincing argument…

EMC’s technology is second to none. They’re leading the cloud computing revolution.  And the transition to cloud computing is still in the early in innings.

What’s more, EMC isn’t a one trick pony!

They’re also involved in another huge trend in tech.  It’s called ‘big data’.  Big data is a term used to describe the massive amounts of data things like social networking creates.  And EMC is at the forefront of helping companies capture and analyze this data.

The bottom line is EMC’s involved in two of the biggest trends in technology since the PC and internet.  It basically insulates them from a macro economic downturn.

These types of technological shifts don’t stop because the economy is slowing.  If anything, this is the one area businesses will continue to spend money.

Businesses know they can’t afford to get left behind in the tech race . And once it’s implemented, cloud computing is huge cost saver.

At this point, the pullback in the stock has been overdone.  At $25.50 per share investors are already pricing a massive slowdown in tech spending.  But it’s unlikely to impact EMC as badly as the current price reflects.

EMC should come racing back once the report earnings in a few weeks.

But the bears have a compelling case as well…

Right now, macroeconomic concerns rule the day. And none of it’s good!

Europe’s economy is on the verge of imploding… Chinese economic growth is falling off a cliff… and the US economy is slowing.

Macroeconomic headwinds aren’t good for growth stocks like EMC.  Investors are simply too afraid to buy growth stocks when the economic growth is danger of falling off a cliff.

What’s more, businesses hate uncertainty too.  And the current mess in Europe is creating a ton of uncertainty.  That means EMC will likely dial back their earnings guidance because they don’t know how badly Europe will impact their earnings.

As you know, weak earnings guidance will always knock a stock down a peg or two.  That should lead to a quick selloff in EMC in the next few weeks.

If you think the bulls are right, take a look at buying the EMC August 2012 $26 Call for around $0.72.

If you think the bears are right, take a look at buying the EMC August 2012 $24 Put for around $0.65.

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Category: Call Or Put Options?

About the Author ()

A former banking executive, Corey Williams is the Chief Options Strategist and co-editor of our well-known daily newsletter, Options Trading Research. Corey’s extensive experience with options goes all the way back to his days in corporate finance. It was this decade in banking where Corey discovered the most important skill an options trader can have– the ability to analyze a company or sector to determine its likely future direction. And now he’s brought this background, experience and love of options to Options Trading Research, the unique daily e-letter devoted exclusively to helping individual investors profit from the very lucrative options market.