Filed under: Major movement, Deals, Hewlett-Packard (HPQ), Options, Technical Analysis
Hewlett-Packard (NYSE: HPQ - option chain) shares are falling this day after the personal giant announced it has concurred to purchase LeftHand Networks, a small Colorado firm specializing in data storage. Companies are generally depressed when they make acquisitions, but often times an economic downturn offers a great chance to expand. If you think that the stock won’t fall by too much, then now could be a good time to look at a bullish hedged trade on HPQ.
HPQ opened this morning at $44.27. So far this day the stock has hit a low of $41.95 and a high of $44.30. As of 12:10, HPQ is trading at $43.00, down $1.95 (4.4%). The chart for HPQ looks neutral and S&P gives HPQ a very positive 5 STARS (out of 5) strong purchase ranking.
For a bullish hedged play on this stock, I would consider an October bull-put credit spread below the $37.50 range. A bull-put credit spread is an options position that combines the buy and sale of put options to hedge risk in case the stock doesn’t do what you think but still leverage nice returns. For this particular trade, we will make a 5.3% return in just two weeks as long as HPQ is above $37.50 at October expiration. Hewlett-Packard would have to fall by more than 13% before we would start to lose money. Learn more about this type of trade here.
HPQ hasn’t been below $39.99 at all in the past year and has shown support around $41 recently.
Brent Archer is an options analyst and writer at Investors Observer.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that might include holdings in companies he writes about. At publication time, Brent controls a bullish hedged position in HPQ.
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