HP, Inc. Results Today - Huge, Unusual Options Activity in Long-Dated HPQ Puts

HP, Inc. (HPQ) is set to release its fiscal Q3 results after the market closes. Investors are heavily purchasing long-dated, deep out-of-the-money put options expiring more than 9 months in the future. Currently trading at $29.69, HPQ recently peaked at $31.30 on August 13. Analysts anticipate a 1.55% revenue decline for Q4, down from the 3.28% increase in Q3.

This drop in revenue, coupled with concerns over consumer demand for HP's products, may be prompting investors to buy these deep out-of-the-money put options. Over 3,000 put contracts at the $22.00 strike price expiring June 17, 2027, have been traded, which is nearly 30 times the previous volume at that strike price and expiry.

The buyers of these puts are anticipating a significant drop in HPQ, with the intrinsic value of the put requiring the stock to fall to $20.21. This would represent a substantial 31.9% decrease from the current price. However, the sellers of the puts are benefiting from a high yield, getting paid $1.79 for every put contract (8.136% of the $22.00 strike price), which represents a 9-month position.

Investors should consider this high yield and potentially lower potential buy-in point. However, the "sell on the news" cycle appears to be strong for HPQ, and investors considering this strategy should be aware that the worst-case scenario may be a 100% loss of capital on the long-dated put investments.