Dell (DELL) lower as Acer-Gateway (GTW) deal is finalized

Dell Inc. (NASDAQ: DELL) stock is trading lower today as Taiwanese computer maker Acer has completed its tender offer for struggling U.S. PC vendor Gateway (NYSE: GTW). The combined company will be the world's third-largest PC vendor, behind Hewlett-Packard (NYSE: HPQ) and Dell, possibly putting some pressure on the top two. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on DELL.

After hitting a one-year high of $29.61 in July, the stock has been shaky over the past three months. This morning, DELL opened at $28.05. So far today the stock has hit a low of $27.85 and a high of $28.22. As of 11:10, DELL is trading at $27.87, down 31 cents (-1.1%). The chart for DELL looks neutral and improving, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

For a bearish hedged play on this stock, I would consider a January bear-call credit spread above the $32.50 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 8.7% return in 3 months as long as DELL is below $32.50 at January expiration. Dell would have to rise by more than 33% before we would start to lose money.

DELL has not been above $30 since early 2006 and has shown some resistance around $28.50 recently. This trade could be risky if the company's earnings (due out on 11/29) are a positive surprise, but even if that happens, this position could be protected by the resistance the stock formed when it topped around $29 in July.

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 DELL, GTW, or HPQ.