HPQ reports tomorrow after the bell, and currently has an inflated IV rank of 69%, IV 32.9%
At the moment, the expected move is +/- 0.9 or 4.7%. Most of the previous 8 reports the stock moved a wider range than this. (Half gaining and half losing).
The October 20 covered call at the 32 delta, $20 strike filled instantly for 18.70. This gives a max profit of $130 above $20 by expiry or total return of 6.95% over cost of 18.70.
If the call expires worthless, the call premium returns almost 2% on the current stock price (at 59 D.T.E. yields 12% annualized) and I'll aim to continue selling calls against it.
With a stock price of 19, a round lot of the stock uses a small part of the portfolio buying power.
HPQ as a stock has been improving lately, and some of the fundamentals I'm on are:
- Free cash flow yield of 5.4% should support the price of the stock
- 2.85% dividend yield (payout ratio under 50%) should support the price of the stock.
- Trading below it's year end fair value of $22 based on 1.63 operating E.P.S. and 5.5% long term growth.
- Average analyst 12 month target of 21.50, with favorable ratings of 4/5 by CFRA & outperform by C.S. Trefis suggests 'fair value' at 18.
- Technically the chart may also suggests a pattern.
- Alternatively I considered selling the 18/20 strangle at 30 deltas for $78 credit. This only would have used $555 buying power.
- plays are often considered like a 50/50 coin toss. At a risk 1 : win 1 ratio, the stock must remain above 17.46 by expiry.