WORK Attracts Options Bulls After Analyst Nod

WORK's December 25 call option is popular today

Oct 29, 2019 at 2:54 PM
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Slack Technologies Inc (NYSE:WORK) stock is up 4.9% to trade at $22.51, after Piper Jaffray initiated coverage with an "overweight" rating, and a $30 price target -- a nearly 40% premium to last night's close. The analyst in coverage waxed optimistic over the company's workforce software, and said the stock's recent sell-off creates an appealing risk/reward opportunity.

This bullish bias has spread to the options pits, too, where more than 27,000 calls have changed hands so far today -- triple the expected intraday amount, and more than four times the number of puts on the tape. The December 25 call is most active, and it looks like new positions are being bought here for a volume-weighted average price of $1.52. If this is the case, breakeven for the call buyers is $26.52 (strike plus premium paid).

Today's call-skewed session is just more of the same for Slack Technologies. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculative players have bought to open 36,003 calls in the past 10 days, compared to 19,252 puts.

While some of this activity could be of the traditional bullish variety, it's also possible short sellers are initiating an options hedge to guard against any upside risk. Short interest on WORK surged nearly 70% in the two most recent reporting periods to 39.03 million shares. This represents roughly 20% of the stock's available float, or 4.8 times the average daily pace of trading.

Looking closer at the charts, WORK's longer-term trend has been lower. Since opening at $36.50 on June 20 -- their first day of trading -- the shares have shed 38%, pressured by their 10-day and 30-day moving averages. Just yesterday, the stock hit a record low of $19.86, though it managed to climb back above the round $20 mark by Monday's close.

work stock daily price chart on oct 29


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