International Paper Plunges 9%—Is This the Start of a Larger Sell-Off?

Summary
• International Paper (IP) crashes 9% intraday to $48.8, its lowest since 2023
• Q2 adjusted EPS of $0.20 misses estimates by 51.1%, margins contract to 1.7%
• Packaging & Containers sector sees mixed performance, with IP down 6.21%

International Paper’s stock has plummeted nearly 9% in a single trading session, marking its most volatile day since the 2023 market correction. The selloff coincides with the release of its Q2 earnings report, which revealed margin compression, cost overruns, and a subdued outlook for its newly acquired DS Smith operations. With the stock trading below its 52-week low and key technical levels breaking, investors are scrambling to assess whether this is a short-term correction or a deeper structural shift in the industrial packaging sector.

Margin Compression and Cost Overruns Trigger Investor Flight
International Paper’s 9% intraday drop is directly tied to its Q2 earnings report, which highlighted deteriorating margins and operational inefficiencies. Despite a 42.9% year-on-year revenue increase to $6.77 billion, adjusted EPS of $0.20 missed analyst estimates by 51.1%. The company cited cost headwinds, including higher energy expenses, planned maintenance outages, and elevated depreciation from its DS Smith acquisition. Packaging Solutions EMEA, which contributed $2.29 billion in revenue, posted a $1 million operating loss, while Global Cellulose Fibers saw a $4 million loss. Management’s admission of margin erosion and soft demand in Europe, coupled with a dynamic PE ratio of -61.3, has triggered a flight to safety among investors.

Packaging & Containers Sector Mixed as IP Drags Down Index
The broader Packaging & Containers sector remains volatile, with leaders like Packaging Corporation of America (PKG) down 1.89% and Smurfit Westrock (SW) falling 4.06%. While IP’s 9% drop is extreme, the sector’s 2.76% daily gain masks underlying fragility. Companies like Ball Corporation (BALL) and Avery Dennison (AVY) have also faced margin pressures due to inflation and supply chain disruptions. IP’s struggles reflect a broader trend of margin compression in the post-pandemic industrial cycle, as rising input costs and tepid demand erode profitability.

Options Playbook: Capitalizing on IP’s Volatility with Short-Dated Contracts
• MACD: 1.626 (bullish) vs. 1.452 (signal line), suggesting short-term momentum
• RSI: 56.0 (neutral) indicates no overbought/oversold extremes
• Bollinger Bands: Price at $48.8, near the lower band of $48.59, signals oversold
• 200D MA: $52.02 (price below) suggests bearish bias

International Paper’s technicals present a mixed picture. While the 56.0 RSI and 1.626 MACD hint at potential short-term bounce, the stock’s 9% drop has pushed it below key moving averages. For options traders, the most compelling plays are short-dated, high-leverage contracts that capitalize on near-term volatility. Two top picks from the options chain are:

• IP20250808C47.5 (Call, Strike: $47.5, Expiry: 2025-08-08):
- IV: 33.20% (moderate)
- Leverage Ratio: 27.40% (high)
- Delta: 0.706 (high sensitivity to price moves)
- Theta: -0.0998 (rapid time decay)
- Gamma: 0.1352 (high sensitivity to price acceleration)
- Turnover: 10,814 (liquid)
- Payoff (5% downside scenario): $0.85 (max(0, $46.36 - $47.5) = $0).
- This contract offers aggressive leverage for a potential rebound above $47.5, with high gamma amplifying gains if the stock rallies.

• IP20250808P48 (Put, Strike: $48, Expiry: 2025-08-08):
- IV: 37.81% (moderate)
- Leverage Ratio: 61.75% (very high)
- Delta: -0.379 (moderate downside exposure)
- Theta: -0.0252 (moderate time decay)
- Gamma: 0.1313 (high sensitivity to price acceleration)
- Turnover: 0 (low liquidity, caution advised)
- Payoff (5% downside scenario): $1.44 (max(0, $48 - $46.36) = $1.64).

Trading Insight: Aggressive bulls may consider IP20250808C47.5 into a bounce above $47.5, while bears eye IP20250808P48 for a deeper pullback. However, the stock’s proximity to support at $46.03 and resistance at $52.26 makes a breakout scenario more likely than a sustained downtrend.

Backtest International Paper Stock Performance
The backtest of Invesco QQQ Trust (IP) after an intraday plunge of -9% shows favorable performance metrics. The 3-Day win rate is 52.54%, the 10-Day win rate is 55.42%, and the 30-Day win rate is 57.46%, indicating a higher probability of positive returns in the short term. The maximum return during the backtest period was 3.16%, which occurred on day 59, suggesting that IP tends to recover moderately after such events.

Act Now: Secure Profits or Hedge Against a Breakdown
International Paper’s 9% drop reflects both near-term operational challenges and broader sector headwinds. While technical indicators like RSI and Bollinger Bands suggest potential for a short-term rebound, the stock’s bearish bias relative to its 200D MA and sector peers like PKG (-1.89%) underscores structural fragility. Investors should prioritize securing profits on long positions or hedging with high-leverage puts like IP20250808P48. Watch for a break below $46.03 support or a sustained rally above $52.26 resistance to confirm the next directional move. In the Packaging & Containers sector, Packaging Corporation of America (PKG) remains a key barometer; its -1.89% decline today highlights the sector’s vulnerability to margin pressures and cost inflation.