Call buyers prepare for Dell (NASDAQ: DELL) earnings

Dell Inc. (NASDAQ: DELL) did not report any notable news this morning following rumors last week that the computer name could acquire Citrix Systems, but the company is due to announce earnings on Feb. 18 after the market closes. While analysts anticipate earnings of 27 cents a share, bullish investors expect the stock to climb throughout the next 11 days when February options expire.

In trading shortly after the market opened, we saw several blocks of the front-month February 13 calls cross the tape thanks to investors who bought the options at a price of roughly 70 cents. That means investors who bought these calls need the stock to close higher than $13.70 at February expiration in order to make money. Keep in mind that investors could choose to sell back the options if the stock pops up significantly prior to options expiration.

More than 8,000 of these options have changed hands so far on the day, and the stock is currently trading up 39 cents to $13.64 per share. The shares have been in positive territory right from the open, despite the initial dip in the market.

The February 13 calls have an implied volatility of 45, compared to a 30-day historical volatility of 35%. Because earnings are due to be released before these options expire, it is not unusual for the implied volatility to be that different from the recently realized volatility.

DELL shares peaked at $16.92 on Sept. 16, and are currently trading around 19% lower. Still, at least one investor expects further upside in the stock and expects to make a quick premium by buying front-month calls.