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Friday, December 9, 2022


Options Volume On HPQ Jumps As Shares Dive To Lowest In A Decade


Today’s tickers: HPQ, KKD & ABX

HPQ – Hewlett-Packard Co. – Shares in HPQ fell to their lowest level in a decade on Tuesday after the company announced fourth-quarter results that missed analyst expectations for sales and included an $8.8 billion impairment charge related to its Autonomy business. Options on the PC maker are seeing heavy volume amid an ugly selloff in the price of the underlying, currently trading down 11% at $11.84 as of 12:35 p.m. ET. Nearly 250,000 call and put options have changed hands on the stock versus the average daily options volume of 47,726 contracts. Calls are slightly more active than puts, with the call-to-put ratio hovering around 1.1 in early-afternoon trading. Weekly calls, specifically the Nov. 23 ’12 $12 strike contracts, attracted particularly heavy trading traffic today. It looks like some strategists are betting the stock could rebound somewhat off its post-earnings report lows by the end of the week. Upwards of 23,000 of the $12 strike weekly calls traded in the first half of the session today against open interest of just 696 contracts. It appears most of these contracts were purchased for an average premium of $0.10 apiece, and may mean some options market participants are placing cheap near-term bullish bets on the computer maker. Traders long the weekly contracts make money as long as shares in HPQ increase 2.2% over the current price of $11.84 to settle above the average breakeven price of $12.10 at expiration.

KKD – Krispy Kreme Doughnuts, Inc. – It’s a sweet day for investors in Krispy Kreme Doughnuts, Inc., with shares in the name soaring 22.5% on the back of better-than-expected third-quarter earnings to the highest level in more than a year. Shares in the doughnut maker are off earlier highs, but continue to trade up approximately 20% on the session at $9.04 as of 11:50 a.m. ET. Buyers of bullish options on Krispy Kreme yesterday prior to the earnings report are enjoying sizable overnight gains in the value of their positions. December expiry call buyers snapped up around 400 of the $7.0 strike calls at an average premium of $0.74 apiece on Monday and purchased roughly 200 of the $8.0 strike calls for an average premium of $0.20 each. Buyers of the $7.0 strike calls now find premium on the contracts has almost tripled to $2.15 each, while premium on the $8.0 strike calls is up six-fold overnight to $1.20 apiece just before midday in New York. One trader looking for KKD shares to extend gains during the next couple of months purchased 185 far-out-of-the-money calls at the Jan. $11 strike for a premium of $0.05 per contract. The trader may profit at expiration next year if shares in Krispy Kreme rally another 22% during the next couple of months to top the effective breakeven price of $11.05.

ABX – Barrick Gold Corp. – Shares in gold mining company, Barrick Gold Corp., reversed earlier losses on Tuesday to trade up 0.70% on the day at $34.53 by 12:05 p.m. ET. Barrick’s shares have declined 25% since the start of 2012, but one or more options players trading April expiry calls today may be looking for a rebound during the next five months. Roughly 9,000 call options changed hands at the April 2013 $35 strike against open interest of 868 contracts this morning, with the bulk of the volume purchased for an average premium of $2.32 per contract. The trader or traders purchasing upside calls on ABX stand ready to profit in the event that shares in the world’s largest metal producer jump 8% to exceed $37.32 at April expiration. Shares in Barrick Gold Corp. traded above $37.32 as recently as November 1st.


Caitlin Duffy

Equity Options Analyst

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