Hewlett-Packard Company (HPQ) provides products and technology to individual customers, small and large businesses and other large enterprises. The company’s stock is currently trading around $25.30 in a 52 week range of $12.22-$27.78. HPQ has had a very strong year adding over 77% to share prices year to date. HPQ is set to announce their most recent quarterly earnings today after the market close. Historically, HPQ has been weak on earnings day over the past 8 quarters. The stock has sold off on earnings day 5 times in the past 8 quarters with an average move of 9.1%. On a chart shares of HPQ are trading in bullish territory according to the Ichimoku Cloud. The future cloud however, is indicating a very neutral future for HPQ. We believe that despite the weakness in historical performance and the relatively neutral chart that HPQ sets up well for a long into earnings. Tech companies have been doing well this cycle and we believe this should be the same for HPQ. Currently the options market is implying a move of $1.80 up or down by this Friday’s expiration. We can use this implied move to calculate an upside target around $27.00. Using this level we can now set up a trade.
Trade: Buying the HPQ Nov 29th 26.5-27.5 Call Spread for $0.25
Risk: $25 per 1 lot
Reward: $75 per 1 lot
Breakeven: $26.75
