Buy Puts on Going-Nowhere Hewlett

tdp2664
InvestorPlace
Though earnings season is on the wane, there are still a few reports on the upcoming schedule of note. Some options trading investors are watching Hewlett-Packard (NYSE: HPQ ), which reports next Wednesday (May 18) after the close. Despite using an HP laptop to write this article, we're bearish on the stock's prospects after earnings … for several reasons. For starters, the shares simply haven't performed well after recent reports. In fact, the stock has dropped after its past four earnings releases, falling an average of nearly 5% after each report.  That's not an encouraging sign. On the chart, the stock has been unable to overcome congestion in the 40-42 area for more than a month. What's more, peak call open interest in the May and June series sits at the 42 strike, which could add another layer of resistance. HPQ's sentiment backdrop isn't helping either. Despite the shares in negative territory for the year, optimism reigns. The put/call and short-interest ratios are low, while 29 of 35 (83%) of covering analysts rate the stock a "buy." We see this as misplaced enthusiasm for an underperforming stock. That leaves the shares vulnerable to cash rotating away as the bulls turn into bears. HPQ isn't painting a pretty picture heading into earnings. The stock has gone nowhere, the recent post-earnings performance is poor, and sentiment is over-the-top bullish.  That combination sounds bearish to us. Buy the HPQ June 41 Put for $1.60 or less. Money-Doubling Options Trades from Earnings Hits & Misses Learn how to cut through the rumor and manipulation surrounding corporate earnings announcements and bank money-doubling option trades all year long. Download our FREE trading guide here .