Turning to the other side of the option chain, we highlight one call contract of particular interest for the April expiration, for shareholders of Hewlett-Packard Co (HPQ) looking to boost their income beyond the stock's 1.8% annualized dividend yield. Selling the covered call at the $33.50 strike and collecting the premium based on the 19 cents bid, annualizes to an additional 41.9% rate of return against the current stock price (this is what we at Stock Options Channel refer to as the YieldBoost), for a total of 43.7% annualized rate in the scenario where the stock is not called away. Any upside above $33.50 would be lost if the stock rises there and is called away, but HPQ shares would have to climb 1.3% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 1.9% return from this trading level, in addition to any dividends collected before the stock was called.
The chart below shows the trailing twelve month trading history for Hewlett-Packard Co, highlighting in green where the $33 strike is located relative to that history, and highlighting the $33.50 strike in red:The chart above, and the stock's historical volatility, can be a helpful guide in combination with fundamental analysis to judge whether selling the April put or call options highlighted in this article deliver a rate of return that represents good reward for the risks. We calculate the trailing twelve month volatility for Hewlett-Packard Co (considering the last 252 trading day HPQ historical stock prices using closing values, as well as today's price of $33.09) to be 34%. In mid-afternoon trading on Monday, the put volume among S&P 500 components was 671,488 contracts, with call volume at 1.32M, for a put:call ratio of 0.51 so far for the day. Compared to the long-term median put:call ratio of .65, that represents very high call volume relative to puts; in other words, buyers are preferring calls in options trading so far today. Find out which 15 call and put options traders are talking about today.