Trade ideas

Today’s trade idea for option traders: HP Inc. (trade closed)

(Last Updated On: 3. March 2021)

trade idea for option traders

Who doesn’t know HP? Originally, one of the early Silicon Valley stocks, the shares of this company continue to underperform the overall technology sector. Although company’s approx. 3% dividend yield is enticing, long-term investors should understand the risks before buying shares of HP. For the glorious growing days of this original tech company actually are gone, at least at the moment. Results of efforts to establish a profitable 3D printing branch are not to be expected soon. But as options traders are usually short-term oriented, there is gathering a momentum in this stock which provides a trade opportunity on HP. So read on, folks.

Disclaimer:
The information I am giving you in this article is for informative purposes only and should not be treated as investment advice. The information presented would not be suitable for investors who are not familiar with exchange traded options. Any readers interested in trading activities related to the information in this article should do their own research and seek advice from a licensed financial adviser.

Type of a trade: Cash secured put (in the money)
Alternatively: Bull put spread
Expiration: 19th March (39 days)
Strike: $28
Premium for 1 option: between $190 and $195 on the day this article was published
Margin: apprx. $340 on the day this article was published

Pros for this trade:
– A strong long signal (I’m using the ADX-Indicator), giving a higher probability that the price will be pushed towards the strike in the next 39 days
– Stock’s price crossed the resistance level (around $26), with a confirmation
– A 2.98% dividend in case one would get the stock assigned
– Relatively narrow bid/ask spread so an order would get filled easier than in other cases
– Relatively neutral Fear & Greed index of 53 on the day this article was published

Cons for this trade:
– Low IV Rank of 8% and not an optimal IV Percentile of about 39% (Source: Trader Work Station)
– Comparatively lower dividend in contrast to other companies

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Result of this trade: You could close the position on 2nd March 2021 for about $21 – $26
Realized profit for 1 option: $166 – $171
Days in the trade: 22 (of maximum 39 days)

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