Shares of Hewlett-Packard (NYSE: HPQ, Stock Forum) have taken it on the chin lately. Since closing $34.08 on Wednesday, February 18, the company has seen its shares tumble to closer to $29.70 today. A less than rosy earnings report delivered after the close on that Wednesday has put the shares under pressure. However, the slide in the shares seemed to be sparking some call buying yesterday by investors looking for a potential bump in the stock.
Looking at the March 30 calls, we find that more than 20,000 traded in the first three and a half hours of trading yesterday. Open interest in these calls is only 1,945 according to the Sidewinder report at www.ONN.tv. What is most noteworthy about this volume is that most of the activity was on the buy side, meaning there are more buyers of these calls than sellers.
As we mentioned, this buying activity could be a bet by an investor that HPQ will regain some of its losses from the last four trading days. The call options traded for around $1.15 with the stock near $29. At that price, the buyer just needs the stock to be above $31.15 to be in the money.
One catalyst that bullish investors could be looking at in HPQ is the fact that the company will be presenting at the upcoming Goldman Sachs Technology and Internet conference. According to the HPQ company website, they will be presenting on Thursday, February 26. This call buyer could be betting that the presentation could lead to a rally in the shares that could turn a profit on the calls. Even if the stock does not make it all the way back to $31.15, the call buyer could see the calls rise if there is enough time left to March expiration for the calls to have some volatility value remaining.
Call buying like this does not mean that investors should run out and buy shares. But it is something that anyone who has a position in HPQ, or is thinking about a position in HPQ, long or short, should be aware of.