Computing giant HP Inc (HPQ) has seen its shares move steadily higher over the past few months, with only minimal pullbacks along the way. One trader is betting the trend will continue.
That’s based on the September $38 calls. Expiring in 141 days, over 3,140 contracts traded against an open interest of 141, for a 22-fold rise in volume. The buyer paid about $1.30 to get into the trade.
With a current share price near $34.50, shares would need to rally about 10 percent for the option trade to move in-the-money. Even with a 110 percent rally in shares in the past year, the company looks attractively valued at 11 times forward earnings and trading at just 0.8 times its price to sales.
Computer sales have been strong in the past year, helping fuel that trend. That trend may slow this year, but the company’s printer division is a major profit center, and its corporate business could see solid growth this year as well.
Action to take: Investors may like shares here. The company has recently raised its dividend and pays a 2.26 percent yield, with room to grow.
For traders, the September calls offer a reasonable upside potential and are far enough out that they could provide triple-digit returns. Traders may want to take profits if the options move in-the-money, which could shave some months off of the trade before the option’s expiration.
Disclosure: The author of this article has no positions in the stock mentioned here, but may make a trade on this company after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.