Schaeffer's Midday Options Update Features Hewlett-Packard.CINCINNATI -- Today's Schaeffer's Midday Options Update features Hewlett-Packard (NYSE NYSE See: New York Stock Exchange :HPQ HPQ Hewlett-Packard Corporation (NYSE) HPQ High Priority Queue ) and Mercury Interactive For another company with a similar name, see Mercury Computer Systems. HP Mercury (formerly Mercury Interactive) is a subsidiary of Hewlett-Packard that is a market leader in automated software quality assurance and offers products in other areas such as diagnostics, (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :MERQ MERQ Mercury Interactive Corp (stock symbol) ). The Midday Options Update contains a brief commentary on the day's most notable activity and a table listing the most-active calls and puts for the day. The Midday Options Update is published every day at www.SchaeffersResearch.com - the home of Bernie Schaeffer and Schaeffer's Investment Research. Take advantage of the timely Schaeffer commentaries by signing up for their free e-newsletters -- Opening View, Market Recap and Monday Morning Outlook. Click here to have the Schaeffer's commentaries delivered to you free via email every day. http://www.schaeffersresearch.com/redirect.aspx?CODE=PRMOU13M&PAGE=1 . Options Update: Hewlett-Packard Ahead of Earnings A daily feature available on SchaeffersResearch.com is "Options Update." Every day, we'll give a brief market overview and focus on one stock that is the center of some heavy option trading. The focus of today's feature is Hewlett-Packard. The Energy Department announced this morning that natural gas inventories dropped by 12 billion cubic feet for the week of August 4. Estimates had ranged from a rise of seven billion cubic feet to a decline of 10 billion cubic feet. Stocks, nevertheless, are 306 billion cubic feet higher than at this time last year and 374 billion cubic feet above the five-year average. In economic news, weekly jobless claims Initial Jobless Claims is a report issued by the U.S. Department of Labor on a weekly basis. This report tracks how many people have filed for unemployment benefits in the previous week. It is a good gauge of the U.S. job market. rose by 7,000 in the U.S. during the week ended August 5, to 319,000. Analysts were expecting the figure to be essentially unchanged. Continuing claims for the week of July 29, meanwhile, rose by 48,000 to 2.48 million. Additionally, the U.S. posted a trade deficit of $64.80 billion in June, matching the consensus view. May's trade-gap figure was revised a bit higher to $64.97 billion. Exports during June rose 2.0 percent to $120.74 billion, while imports grew by 1.2 percent to $185.55 billion. Most-Active Options Update At 3:47 p.m. Eastern Time, the Dow Jones Industrial Average Dow Jones Industrial Average The best known U.S. index of stocks. A price-weighted average of 30 actively traded blue-chip stocks, primarily industrials including stocks that trade on the New York Stock Exchange. (DJIA DJIA See Dow Jones Industrial Averager (DJIA). - 11,125.1) has added 0.44 percent. The S&P 500 Index (SPX (Sequenced Packet EXchange) The transport layer protocol in the NetWare operating system. Similar to the TCP layer in TCP/IP, it ensures that the entire message arrives intact. SPX uses NetWare's IPX as its delivery mechanism. - 1,272.10) has gained 0.49 percent, and the Nasdaq Composite The Nasdaq Composite is a stock market index of all of the common stocks and similar securities (e.g. ADRs, tracking stocks, limited partnership interests) listed on the NASDAQ stock market, meaning that it has over 3,000 components. It is highly followed in the U.S. (COMP - 2,072.6) has advanced 0.60 percent. At 3:47 p.m. Eastern Time, 3,081,344 calls have changed hands compared to 2,496,066 puts, equaling a single-day put/call volume ratio of 0.81. The CBOE's equity put/call volume ratio stands at 0.84, while the ISE's ratio comes in at 0.85. Hewlett-Packard Hewlett-Packard (NYSE:HPQ) hit the headlines late in July with the announcement that it plans to buy Mercury Interactive (NASDAQ:MERQ), which produces test software for network and enterprise computer applications. This was big news, because the $4.5 billion price tag is the largest we have seen since HPQ bought Compaq in 2002. Nevertheless, news today involves even larger numbers. HPQ is due to report earnings next Wednesday, and a survey by Thomson First Call reveals that analysts expect the company to earn 47 cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. on $21.8 billion in revenue. This equates to a 32-percent increase in earnings per share, with revenue growth of five percent. In the options pits, HPQ's August 32.50 put (HPQ TZ) was traded enthusiastically; with 13,044 contracts crossing the tape by the time we grabbed our figures, on initial open interest of 72,727. At last check, the stock was trading at 32.99 so this option is very near the money. From a technical perspective, the stock went on a tear two years ago, rising almost monotonically on the support of its 10-week, and occasionally 20-week, moving averages. However, it leveled off, consolidating on the support of the 32 level early this year, and those 10-week and 20-week trendlines now look almost meaningless, trailing behind the stock like the tail of a kite. The daily chart shows the way HPQ has trended sideways for most of this year. There's a strong sign of resistance at the 34 level, which has kept the stock down, and a strong sign of buying power Buying Power The money an investor has available to buy securities. In a margin account, the buying power is the total cash held in the brokerage account plus maximum margin available. Also referred to as "Excess Equity. on dips to the 30 level. I think a nimble call buyer might do rather nicely the next time HPQ falls to 30. Turning to the sentiment, there is not very much short selling Short Selling The selling of a security that the seller does not own, or any sale that is completed by the delivery of a security borrowed by the seller. Short sellers assume that they will be able to buy the stock at a lower amount than the price at which they sold short. to be seen. Just 1.8 percent of HPQ's float is sold short, offering little fuel for a short-covering rally. According to Zacks, nine of the 19 analysts covering HPQ rate the shares a "strong buy," two more see it as a "buy," and no one at all has it as a "sell." There is a risk of downgrades unless HPQ picks up. The Schaeffer's put/call open interest ratio (SOIR SOIR Schaeffer's Put/Call Open Interest Ratio SOIR Simultaneous Operations on Intersecting Runways ) for HPQ is 0.99, which tells us that calls and puts are just about equally popular in the front three months of options. However, today's SOIR is higher than 92 percent of the readings taken during the past year. In other words Adv. 1. in other words - otherwise stated; "in other words, we are broke" put differently , it's pessimistic, which suggests that money could be waiting on the sidelines On the sidelines An investor who decides not to invest due to market uncertainty. on the sidelines Of or relating to investors who, having assessed the market, have decided to avoid committing their funds. . On our Schaeffer's Equity Scorecard, the stock scores 7.0 out of 10, suggesting that the next move might be to the upside. My advice: watch for a clear break above 34 unless you're prepared to be patient. Click here to see a Weekly chart of Hewlett-Packard since August 2004 with 10-week and 20-week moving averages and a Daily chart of Hewlett-Packard since January 2006: http://www.schaeffersresearch.com/wire?ID=17108 . The best way to take advantage of the timely Schaeffer commentaries is to sign up to receive their free e-newsletters -- Opening View, Market Recap and Monday Morning Outlook. Click here to have the Schaeffer's commentaries delivered to you free via email every day. http://www.schaeffersresearch.com/redirect.aspx?CODE=PRMOU13M&PAGE=1 . About Schaeffer's Investment Research (www.SchaeffersResearch.com) Schaeffer's Investment Research, founded by Bernie Schaeffer in 1981, is a financial information and trading resources company. It publishes Bernie Schaeffer's Option Advisor, the nation's leading options subscription newsletter. The firm's contrarian approach focuses on stocks with technical and fundamental trends that run counter to investor expectations. The firm's website, http://www.SchaeffersResearch.com , is recognized as one of the leading information sources for stock and options traders and was cited as the top options website by both Forbes and Barron's. Click here for more details about Schaeffer's trading methodology: http://www.SchaeffersResearch.com/method . |
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