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Put Players Surround OfficeMax, Despite a Bullish Brokerage Nod

OMX tacks on more than 8% in today's session

by 1/18/2012 12:15:00 PM
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Shares of OfficeMax Incorporated (OMX - 5.04) are soaring today, after Barclays Capital raised its outlook on the stock -- and Radioshack (RSH) -- to "equalweight" from "underweight." This bullish nod echoes the optimism emanating from the brokerage bunch, as Thomson Reuters pegs the average 12-month price target at $8.13 -- representing a bold 72% premium to yesterday's close of $4.65.

Following this morning's upgrade, OMX is experiencing heavy option activity in today's session, with puts and calls trading at six times and four times their average intraday volume, respectively. Roughly 1,600 put contracts have crossed the tape, compared to fewer than 400 call contracts.

This preference for puts on OMX is a relatively new trend among options players, as evidenced by data gathered from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). In fact, over the course of the past 10 trading sessions, speculators on these exchanges have bought to open more than 28 calls for every put. What's more, this ratio ranks higher than 82% of other such readings -- showing that bullish bets have been picked up over bearish ones at accelerated levels in the last two weeks.

Echoing this bullish bias, OMX's Schaeffer's put/call open interest ratio (SOIR) of 0.32 ranks at an annual nadir, indicating that short-term speculators have never been more optimistically aligned toward the stock in the previous year.

Delving a bit deeper into the information, the recent affinity for calls may be pessimistic players looking to hedge their bearish bets. Short interest currently accounts for an elevated 17.4% of the stock's available float. It would take almost two weeks to cover these shorted shares, at OMX's average daily trading volume.

Price Chart of OMX

Today's 8.5% jump puts a dent in OMX's staggering 74.6% deficit accrued over the past 52 weeks. More recently, the equity has reclaimed territory north of its 20- and 40-day moving averages -- two trendlines that ushered OMX steadily lower in 2011.


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