Two Ways to Trade Dell Through Options as the Tech Giant Offers Growth at a Reasonable Price

“Growth at a reasonable price,” better known as GARP, is a strategy designed to uncover companies with solid earnings growth that aren’t trading at overinflated valuations. It strikes a balance between pure growth investing and value investing, appealing to those who want upside potential without paying irrational premiums.

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One of the key tools in GARP analysis is the PEG ratio the price-to-earnings (P/E) ratio divided by the company’s earnings growth rate. For simplicity, the growth rate is treated as a whole number rather than a percentage.

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Take this example: A stock trading at $100 with earnings of $6 per share has a P/E ratio of about 16.7. If analysts project earnings of $7.20 per share next year, that’s a 20% growth rate. Divide 16.7 by 20, and you get a PEG of roughly 0.83. By convention, a PEG ratio below 1 suggests the stock may be undervalued relative to its growth prospects.

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As the S&P 500 continues hitting record highs, identifying reasonably priced growth stocks is both appealing and difficult. Unsurprisingly, most large-cap names no longer fit the bill. A quick scan of the Russell 1000 shows only about 200 companies with a forward PEG ratio of 1 or less. “Forward” refers to using consensus estimates for next year’s earnings to calculate both the P/E ratio and growth rate compared with the prior year’s actual results.

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But many stocks that make this cut appear “cheap” for valid reasons. Cyclical companies often pop up because their near-term earnings growth looks strong, though the inherent volatility of their industries makes it hard to project that momentum long-term.

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Dell Technologies is a name that comes close to fitting the GARP mold. Analysts expect the company to generate adjusted EPS of about $11.05 in fiscal 2027 (essentially calendar year 2026, given Dell’s January year-end). That gives the stock a forward P/E ratio near 12, well below the S&P 500’s forward multiple of roughly 25.

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Dell’s earnings are forecast to climb nearly 16% in the coming year and another 10.5% the year after solidly ahead of the S&P 500’s 10-year average earnings growth rate of about 8.35%. While Dell’s PEG ratio doesn’t quite dip below 1, it’s close enough to stand out versus the broader market.

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Although Dell isn’t typically considered a pure AI stock, it’s still riding the wave of strong IT spending, particularly in AI servers. While server sales don’t offer the fattest margins in hardware, demand remains robust.

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The main challenge for Dell has been persistent undervaluation. Over the past five years, peers have traded at an average forward P/E of about 15.6x, compared with Dell’s average of 12.8x. Today’s multiple is only slightly above that average, underscoring how often investors underappreciate Dell’s earnings power.

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With valuation anchoring the downside and investor skepticism limiting the upside, Dell trades in a range that may lend itself well to options strategies. For moderately bullish investors, two ideas stand out:

1. Covered Call Strategy – For those holding Dell shares or looking to buy, writing the November $145 calls could be attractive. The options recently traded around $3.75. Given Dell’s 52-week high of $147.66, the trade allows for nearly 10% upside in less than two months. If called away, the net sale price would be $148.75 ($145 strike plus $3.75 premium).
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2. Cash-Covered Put Strategy – Investors more focused on yield, or those preferring a lower entry point, could look at the November $125 puts. Selling those contracts for about $5 provides a healthy premium. If assigned, you’d be obligated to buy Dell at an effective price of roughly $120 per share ($125 strike less $5 premium).

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Dell might not deliver the explosive narrative of an AI frontrunner, but it offers something equally important steady growth at a discount valuation. For GARP investors, that combination can be compelling, especially when paired with strategic use of options to enhance returns or secure attractive entry points.

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