Unusual Options Activity: Hewlett Packard Enterprise (HPE)

Communication equipment producer Hewlett Packard Enterprise (HPE) is up nearly 20% over the past year. One trader sees shares surging higher in the months ahead.

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  • That’s based on the September $35 calls. With 95 days until expiration, 5,433 contracts traded compared to a prior open interest of 128, for a 42-fold rise in volume on the trade. The buyer of the calls paid $0.20 to make the bullish bet.

    HPE shares recently traded near $22, meaning the stock would need to soar about 59% for the options to move in-the-money. Shares recently broke to a new 52-week high over the past few weeks.

    A further move higher is likely. Shares trade at about 11 times forward earnings, and the company has started to see some analyst upgrades, as the company has now beat earnings expectations in each of the past four quarters.

    Action to take: Investors may like shares here. While at an all-time high, the break higher is a sign that the stock can continue to trend higher, and that it will settle into a higher trading channel in time.

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  • At current prices, HPE also pays a 2.5% dividend.

    For traders, the September $35 calls are aggressive. But they’re also inexpensive, and could see triple-digit gains if the current rate of price appreciation continues.

     

    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.

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