Hewlett-Packard Company (HPQ) Bulls Eye a Repeat of Earnings History

Hewlett-Packard Company (HPQ) will report earnings after tonight's close

by Karee Venema

Published on Feb 24, 2015 at 1:43 PM
Updated on Jun 24, 2020 at 10:16 AM

Hewlett-Packard Company (NYSE:HPQ) is slated to take its turn in the earnings confessional after tonight's close, and ahead of the scheduled event, bullish betting has been gaining traction. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), for instance, HPQ's 10-day call/put volume ratio has jumped to 2.66 from 1.87 since the start of the month. What's more, the current ratio ranks in the 88th annual percentile, meanings calls have been bought to open over puts at a faster-than-usual clip.

It's a similar trend in today's session, with calls crossing the tape at nine times what's typically seen at this point in the day, and outpacing puts by a more than 6-to-1 margin. A hefty portion of the day's volume occurred when one large block of 10,000 March 38.50 calls was bought at the same time a symmetrical block of March 42 calls was sold. According to Trade-Alert, this appears to be the initiation of a long call spread and could possibly be tied to stock.

Historically speaking, HPQ's post-earnings price action tends to side with the bulls. Over the past eight quarters, the equity has averaged a gain of 2.9% in the session subsequent to reporting. This time around, the options market is expecting a move of 5%, and considering the weekly 2/27 38-strike call is pricing in higher implied volatility than the put (69.9% vs. 67.4%), it appears this action is expected to resolve to the upside.

Technically speaking, Hewlett-Packard Company (NYSE:HPQ) has been a long-term outperformer, and over the past two years, has enjoyed a steady lift higher from its 40-week moving average. After hitting a three-year peak in Januaryy, the stock pulled back to this steady layer of support -- and since taking a sharp bounce, has added nearly 8% to trade at $38.19.

Weekly Chart of HPQ Since February 2013 With 40-Week Moving Average

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