(By Andrew Wilkinson) Hewlett-Packard Co. (HPQ)– Bullish
trading in Hewlett-Packard options this morning suggests some traders
are positioning for a rebound in battered shares of the tech giant. The
stock snapped a four-day losing streak on Tuesday, rallying 2.1% to
$21.50 by midday in New York, following the better-than-expected ISM
non-manufacturing index report this morning. Shares in HPQ have lost
nearly 30.0% of their value since mid-February. Traders picking up
in-the-money calls in the July expiry are prepared to benefit should
shares in Hewlett continue to recover during the next six weeks. More
than 11,500 calls have changed hands at the July $21 strike against open
interest of 3,028 positions. It looks like most of the contracts were
purchased for an average premium of $1.36 apiece, thus positioning
buyers to profit at expiration should HPQ's shares rally another 4.0% to
surpass the average breakeven point at $22.36.
News Corp. (NWSA)– A sizable trade
in News Corp. call options today appears to be a bet against any
significant rally in shares of the international media company during
the next eight trading sessions. The stock is currently flat on the day
at $18.59 as of 12:15 p.m. ET. News Corp. popped up on our ‘hot by
options volume' market scanner this morning after some 8,295 June $19
strike calls were sold at a premium of $0.20 apiece. The strategy
results in maximum possible profits of $0.20 per contract should the
options expire worthless next week. Naked short calls leave the seller
vulnerable to unlimited losses to the upside in the event of a rally in
the price of the underlying above the effective breakeven price of
$19.20, however, it's possible the strategist is long the stock and
selling covered rather than uncovered calls against the position.
Shares in News Corp. have declined 10.2% in the past four weeks, but
need only rally 3.3% over the current price of $18.59 to surpass the
$19.20 breakeven point by June expiration.
Range Resources, Inc. (RRC)– What
appears to be an iron condor initiated on independent natural gas
exploration and development company, Range Resources, Inc., today looks
for the price of the underlying shares to settle between $57.50 and
$65.00 at December expiration. Shares in Range Resources are up 1.05% on
the day at $55.21 in early-afternoon trading. The combination of a
355-lot Dec. $65/$70 credit call spread and a 355-lot Dec. $52.5/$57.5
credit put spread results in total premium received of $3.75 per
contract. The strategist responsible for the iron condor keeps the full
$3.75 net credit, the maximum possible payout available on the position,
should shares in Range Resources trade within the $57.50 to $65.00
range when the final full trading week of 2012 draws to a close in
December. RRC shares have closed within the $57.50 to $65.00 price range
on approximately 70.0% of the 106 trading days elapsed in 2012 so far.
Maximum potential losses of $1.25 per contract result if shares settle
below the lower breakeven price of $52.50 or above the upper breakeven
point at $70.00 at December expiration.