Large call spread in Hewlett-Packard

optionMONSTER

Hewlett-Packard is attracting a large call spread even as the stock comes off its highs of the day.

optionMONSTER systems show more than 103,000 HPQ options trade, compared to a daily average of 33,000 contracts. The big trade so far is in the January 2014 calls.

A trader sold 10,000 of the 15 calls for $2.33 against open interest of more than 26,000. At the same time, he or she bought 10,000 of the 10 calls for $5.48 in volume that was more than twice the previous open interest, indicating a new position.

This trade could be closing the higher strike calls and rolling the position lower. But given the trade data and the fact that the spread is almost fully in the money , it is very likely a new vertical  spread . The trader would then be spending $2.15 for a spread that is $4.97 in the money and has a very high probability of profit. (See our Education section)

HPQ is trading at $14.90, up 4.6 percent on the day. The stock has come down from a high of $30 in February and hit a low of $11.35 in late November but is now back to where it was at the start of October.

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