HPQ, WFC Options – Unusual Trading Activity – April 21, 2014
This week we’re taking a look at unusual options trading activity in Hewlett-Packard (HPQ) and Wells Fargo (WFC).
As many of you know, unusual options volume can be a valuable indicator as to what traders are thinking, and more importantly, where these stocks are heading in the short-term.
This is something professional options traders pay a lot of attention to, and for good reason… Unusual options activity can “tip off” big moves in a stock, either up or down.
So let’s take a look at some ‘interesting’ activity that caught our eye this week:
Hewlett-Packard (HPQ)
A strategist is projecting computer giant HPQ to trade in a higher range in the next couple months.
HPQ is currently trading for $32.16. The price is 72% above the 52-week low of $18.65 and is just 5% below the 52-week high of $33.90.
The trader bought 1,700 June 34 calls and 1,700 June 42 calls. At the same time, he or she sold 3,400 of the June 38 calls. This spread cost a total of $0.55 and is commonly known as a call butterfly.
Basically, the butterfly spread is maximized if HPQ closes at $38 on June expiration (with a max gain of $3.45 per spread). However, the trader will make money in a wide range of prices, from $34.55 to $41.45. As such, this butterfly is a good, cheap way to bet on HPQ upside.
Wells Fargo (WFC)
At least one trader believes Wells Fargo is going to hold at roughly current levels (or move higher).
WFC is trading for $49.12 and is up around 8.5% for the year. The shares are up 40% from the 52-week low of $35.17 and are just 3% below the 52-week high of $50.49.
The trader sold 5,000 May 3rd $48.50 weekly puts for $0.23. The strategy is maximized if the shares remain above $48.50 by May 3rd expiration. The total premium collected amounts to $115,000.
WFC has strong support around $48, so there’s isn’t too much risk in this two-week trade. However, the trader may also be using the put sale as a method to get long the shares at a cheaper price than the current level.
More Options Ideas…
That wraps up this week’s unusual options trading and volume…
Keep in mind, there’s a lot more unusual options activity going on than what we discuss here.
We just try to bring you what we feel are the most significant ones– and the ones you might actually be able to make some money on!
So keep an eye on your email inbox… we have a lot more options trading ideas coming your way!
Yours in Profit,
Gordon Lewis
Category: Unusual Options Trading Activity
