Hewlett-Packard Co. (HPQ: sentiment, chart, options) has seen some unusual call activity today. The stock's August 42.50 strike has seen more than 11,000 calls change hands, compared to open interest of only 9,751 contracts. The majority of this volume traded in two large blocks, totaling 10,000 contracts, on the NYSE Arca at 12:37 p.m. Eastern time. The blocks changed hands for the bid price of $0.50, indicating that they were sold to open, and were marked "spread."

After some digging, I found the other half of this trade at HPQ's July 38 call. Four blocks, totaling 5,000 contracts, traded at the same time on the same exchange for the ask price of $1.77. The total outlay for this position, which appears to be a ratio diagonal calendar spread, is $1.27, or $385,000.

Diagonal spreads are frequently used as "roll" trades. In other words, the diagonal will often involve selling a short-dated option to close while buying a longer-dated option to open. Nevertheless, both legs of the trade can also be initiated simultaneously. Typically, as the shorter-term option expires, the trader will sell a back-month, near-the-money option, changing the diagonal spread into a regular credit spread.