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Of the 20 equities seeing the heaviest options volume in recent sessions, three names of notable interest this afternoon are Hewlett-Packard Company (NYSE:HPQ), Apple Inc. (NASDAQ:AAPL), and Oracle Corporation (NASDAQ:ORCL). Here is a quick look at today's interesting activity in these options pits.
Thanks to discouraging data on PC sales, Hewlett-Packard Company (HPQ) -- along with tech-sector peers Microsoft Corporation (NASDAQ:MSFT) and Intel Corporation (NASDAQ:INTC) -- is a blue-chip black sheep today, with the stock down 6.6% at $20.84. What's more, options traders are rolling the dice on more downside for HPQ, with puts flying off the shelves at three times the normal rate. Most popular are the weekly 4/12 20.50- and 21-strike puts, which have seen around 4,800 and 5,500 contracts change hands, respectively. Most of the puts traded on the ask side, and volume is outstripping open interest at both strikes, confirming our theory of newly bought bearish bets. By purchasing the 20.50-strike puts at a volume-weighted average price (VWAP) of $0.10, the buyers will begin to profit if Hewlett-Packard sinks beneath the $20.40 level (strike minus VWAP) by Friday's close. Meanwhile, the 21-strike puts traded at a VWAP of $0.19, indicating a breakeven of $20.81 for the buyers. Risk is limited to the initial premium paid for the puts, should HPQ remain north of the strikes through the end of the week.
Elsewhere in the tech sector, Apple Inc. (AAPL) is down 0.2% at $434.69, after Morgan Stanley dropped its price target to $600 from $630 and trimmed its fiscal second-quarter earnings estimates. The brokerage firm said the combo of massive inventories and slow demand ahead of a possible September iPhone debut could weigh on AAPL shares in the short-to-intermediate term. In the options arena, premium sellers also harbor low near-term expectations for Apple Inc. Specifically, traders are selling to open the weekly 4/12 440-strike calls, and can pocket the net credit as long as AAPL remains beneath the $440 level through Friday's close. More "vanilla" option bears are buying the weekly 4/12 430- and 435-strike puts, gambling on an extended retreat for AAPL, which has shed more than 18% in 2013.
Finally, software maker Oracle Corporation (ORCL is following the broader equities market higher, up 0.2% at $33.80. Still, puts are the options of choice today, with traders betting on an end-of-week pullback. The equity's near-the-money weekly 4/12 32.50- and 33-strike puts have each seen around 3,000 contracts change hands -- mostly at the ask price, suggesting they were purchased. Furthermore, volume has outpaced open interest at both strikes, hinting at newly added positions. The 32.50-strike puts crossed at a VWAP of $0.03, meaning the buyers will begin to make money if ORCL sinks beneath the $32.47 level over the next couple of sessions. The 33-strike puts, meanwhile, traded at a VWAP of $0.04, making breakeven $32.96 for the buyers. Again, though, the most the investors have put on the line is the premium paid at initiation, should Oracle extend today's advance.
The 20 stocks below have attracted the highest options volume -- in the front three-months' series -- during the past 10 trading days. The companies highlighted are those that are new to the list since the last time the study was run. Data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White.