Options Check-Up: Hewlett-Packard, Adobe Systems Incorporated, eBay

Analyzing recent option activity on HPQ, ADBE, and EBAY

Digital Content Group

Dec 9, 2014 at 7:51 AM

Among the stocks attracting attention from options traders lately are tech giant Hewlett-Packard Company (NYSE:HPQ), software powerhouse Adobe Systems Incorporated, and online auctioneer eBay Inc (NASDAQ:EBAY). Below, we'll break down how option buyers are positioning themselves, and how much speculators are willing to pay for their bets on HPQ, ADBE, and EBAY.

HPQ followed the broader market lower yesterday, dropping 2.4% to close at $38.46. The downward move is an unusual one for the stock, as it has been on a technical tear in 2014, gaining 37.5% year-to-date. Regardless, bearish options traders have been targeting Hewlett-Packard Company recently. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 1.04 sits only 4 percentage points from an annual high, meaning puts have rarely been bought to open over calls at a faster pace in the last year. Now is an optimal time to pick up HPQ's short-term options, as its Schaeffer's Volatility Index (SVI) of 18% is lower than 95% of similar readings taken in the last year, implying near-term options are extremely inexpensive, from a volatility standpoint.

Pessimism is growing ahead of ADBE's fiscal fourth-quarter earnings report -- tentatively scheduled for release this Thursday evening -- with the stock shedding 0.5% yesterday to finish at $72.05. Elsewhere, Adobe Systems Incorporated's 50-day ISE/CBOE/PHLX put/call volume ratio of 0.95 ranks in the bearishly skewed 89th percentile of its annual range. On a volatility basis, the security's short-term options are more expensive than normal, per its SVI of 35%, which lands in its 61st annual percentile.

EBAY has been struggling around the breakeven mark for several weeks, closing at $55.15 yesterday, a gain of 0.6%. Traders in the equity's options pits are taking a bearish stance. Specifically, at the ISE, CBOE, and PHLX, eBay Inc's 10-day put/call volume ratio comes in at 0.83 -- in its 87th annual percentile. From a volatility perspective, the stock's near-term options are inexpensive, as its SVI of 18% ranks in the 15th percentile of its annual range.

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