Betting on later-term upside in Hewlett-Packard (NYSE: HPQ)


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Shares of Hewlett-Packard Co. (NYSE: HPQ ) are relatively unchanged on the day Friday, but options volume during afternoon trading suggests one investor expects significant upside in the stock throughout the later-term.

HPQ did not announce any news today, so it's no surprise that the stock is up only 10 cents to $53.73. However, the stock is trading right around its 52-week high of $53.97, and call buying action suggests an investor expects the stock to reach new highs sometime during the next seven months.

At 3:19 p.m. EST, a block of more than 45,000 November 70 calls changed hands for the ask price of 25 cents per contract versus current open interest of zero contracts, indicating bullish investors bought these options to open. This long call trade bets on the stock to rally at least 29% throughout the later-term, and for HPQ shares to climb higher than $70.25 prior to November options expiration. Keep in mind that HPQ shares have not reached $70 throughout the last five years, and average daily options volume is roughly 30,000 contracts. This single trade trumped normal options volume and calls for the stock to trade at a new high.

The November 70 calls have gained three cents so far on the day, and have an implied volatility of 20% compared to the stock's 30-day historical volatility of just 10% (the buying action pushed up the price of the calls and their implied volatility on the day).

HPQ has not announced its next earnings release date, but the market anticipates the report around May 18. Think HPQ stock has significant upside in store? Investors can use options as a cheaper alternative to go long stock. Find out more by evaluating risk/reward dynamics of trades like this by opening a free virtual trading account today. Ready to trade in the real world? Why not start your portfolio with 100 commission-free trades ?

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Options

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Jud Pyle

Jud Pyle

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