Friday, February 22, 2013

Hewlett-Packard (HPQ) - Stock Rockets on Earnings; Did Someone Know? Here are $4.5 million Reasons to Think... Yes...

HPQ is trading $19.47, up 13.9% off of earnings with IV30™ down 29.8%. The LIVEVOL® Pro Summary is below.


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This is a quick note on what appears to be some very well timed option trades in HPQ just ahead of earnings in options that expire the day of earnings i.e. today.

Let's start with the stock price of HPQ on close 2-20-2012, below.

So, we're talking sub $17.00. Now let's look at the option activity specifically on the Feb22(W) 17.5 calls. That is, the OTM calls that expire on the day after the earnings announcement.

I've highlighted the line. We can see that 21,497 calls traded for ~$0.28 each with existing OI of 5,124. Now, let's turn to Thursday's closing options montage.

First, note that the OI jumped from 5,124 to 21,760 -- so the lion's share of the trades on Wed were new opening positions. We can also see that another 14,000+ of those weekly calls traded, this time for ~ $0.33 each.

And today... Let's look at the options montage.

We can see the OI is now 31,864 for a total gain in OI from Wed --> Fri of 5,124 --> 31,864 or 26,740 new opening long call positions for an average price of ~$0.30. And how did that trade work out?

With HPQ at $19.50, those calls expiring today are worth $2.00 each, or a $1.70 gain on a $0.30 risk for a 550%+ gain or $4.5 million gain on a bet of ~$800,000.

Not too shabby...

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This is trade analysis, not a recommendation.

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1 comment:

  1. Could you please share how you decide to choose this option to buy? The put did not seem to be low in volume as well. Why didn't you take put? Thanks.