Sarah Wasserman (swasserman@sir-inc.com) Tech stocks have been in the spotlight lately, with Dell, Inc. (DELL) and Intuit Inc. (INTU) each reporting earnings on Thursday. Next up is sector peer Hewlett-Packard Company (HPQ), which will report its fourth-quarter earnings after the close on Monday, Nov. 22. For the quarter, analysts are expecting HPQ to post a profit of $1.27 per share. In the past four quarters, HPQ has exceeded analysts' expectations three times, meeting the consensus estimate in the most recent reporting period.
Option players have flocked to HPQ today, with some 45,000 contracts changing hands so far -- more than double the equity's expected single-session option volume. In fact, it seems that one option speculator is responsible for a fair portion of today's volume.
Early this morning, 5,300 December 39 puts, marked "spread," traded at the bid price of $0.57, while 5,300 December 45 calls, also designated "spread," crossed the tape at the ask price of $0.37, for a credit of $0.20 per pair of contracts. By initiating this synthetic long stock position with split strikes, the trader has a little more downside protection than he would've had with a regular synthetic long stock position (the latter of which involves buying a call and selling a put with the same strike). Essentially, the trader is betting on HPQ to muscle above $45 by December expiration. The shares are currently trading around $42.26.
Technically speaking, HPQ has been hovering between $42 and $44 for the past several weeks. For the record, the tech stock hasn't closed a week below $39 since Sept. 10.
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