Analysts, Options Traders Rush HP After Layoff News

HPQ put volume hit an annual high today

Oct 4, 2019 at 2:42 PM
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HP Inc (NYSE:HPQ) stock is spiraling -- down 10% at $16.56, fresh off a two-year low of $16.46 -- after the tech giant said it will cut about 7,000-9,000 jobs, or up to 16% of its workforce, as part of a broader restructuring effort, which will result in a one-time charge of $1 billion. However, the company also expects these actions to result in savings of about $1 billion by the end of fiscal 2022.

Analysts have been quick to chime in on HPQ, with Loop Capital downgraded the stock to "hold" from "buy," and lowering its price target to $19 from $21. The brokerage firm said these new structural changes create "reduced visibility to HPQ's Printing model development," and "valuation may remain at bay," as a result. Price-target cuts were also issued at Credit Suisse (to $18) and BofA-Merrill Lynch (to $16).

HPQ options traders are active today, too. With about 90 minutes left in today's trading, around 40,000 puts and 32,000 calls have changed hands -- eight times what's typically seen at this point, and the former a new 52-week peak. The January 2022 15-strike put is most active, and looks tied to stock. The weekly 10/11 18-strike put is also popular, and some traders may be liquidating their now in-the-money options.

On the call side, the weekly 10/11 17 strike is also among HPQ's most active options, and it looks like new positions are being purchased here for a volume-weighted average price of $0.27. If this is the case, breakeven for the call buyers at the close next Friday, Oct. 11, is $17.27 (strike plus premium paid).

hpq stock daily price chart on oct 4


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