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As Hewlett-Packard Company (NYSE:HPQ - 23.41) prepares for its annual shareholder meeting today, options are flying off the shelves for the tech giant. Overall volume is double the normal amount, and one of the most popular options is the back-month May 25 call.
The strike has seen implied volatility tick up today, and volume more than doubles open interest, indicating that at least some of the 8,800 contracts changing hands were bought to open new positions. HPQ shares need to close above $25.58 (strike price plus the volume-weighted average price of $0.58) on the expiration date of May 17 for the trades to be profitable. That's a 9.3% jump from the stock's current trading level.
Given Hewlett-Packard's recent performance, that might be a reasonable target. HPQ has made a remarkable comeback in the last few months, more than doubling in value since hitting its annual low of $11.35 on Nov. 20. The company's shares are up 64.3% in 2013 alone, and have been guided up the charts by strong support from their 10-day and 20-day moving averages. And the stock is now trading above its price target of $18.67 set by analysts -- so more price-target hikes could provide further momentum.
The latest round of bullish trades is in direct opposition to the recent sentiment toward Hewlett-Packard on the option floor. The stock's Schaeffer's put/call open interest ratio (SOIR) stands at 1.11, indicating that put open interest among options due to expire in three months or less outweighs call open interest. What's more, this ratio is higher than 82% of the past year's readings. Additionally, HPQ's 10-day put/call volume ratio on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is 1.13, with puts being bought to open at a faster rate than calls. This is also approaching an annual peak, in the 83rd percentile.