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Office Depot, Inc. (ODP - 3.48) took its turn in the earnings confessional ahead of this morning's bell. Benefiting from an extra week of sales, ODP said it swung to a fourth-quarter profit of $20.4 million, or 4 cents per share, versus last year's loss of $99.4 million, or 39 cents per share. Excluding items, such as a $24-million tax benefit, earnings arrived at 3 cents per share. Revenue came in flat on a year-over-year basis at $3 billion, while gross margin expanded to 30.3%. The profit was stronger than forecast, as analysts were calling for ODP to break even on a per-share basis on $3 billion in sales.

ODP's fourth-quarter profit and margin expansion are being celebrated in today's session, with the stock adding around 15% at last check. Today's post-earnings push only reinforces the equity's recent bout of technical strength. Not only has ODP tacked on 40.5% in 2012, but the security has also outperformed the broader S&P 500 Index (SPX) by 29.7% in the last 40 trading sessions. Although the stock recently slipped below support at its 10- and 20-day moving averages -- two trendlines that have pushed the stock higher in 2012 -- today's pop positions the equity back above these levels.

Price Chart of ODP since January 2012 with 10- and 20-Day Moving Averages

Heading into today's announcement, Wall Street did not seem too convinced of the stock's ability to maintain its upward momentum. Zacks reports that 10 analysts maintain a "hold" or worse suggestion toward the stock, compared to just three "strong buys."

In addition, short interest accounts for 9.8% of ODP's available float. It would take nearly seven days to cover these shorted shares, at the security's average daily trading volume.

This dire outlook toward ODP also made its way over to the options arena, where the equity's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 1.59 ranks just three percentage points from a 52-week peak. In other words, traders have been picking up puts over calls at a near annual-high clip during the past two weeks.

However, following today's promising earnings report, sentiment toward ODP may be shifting to the bullish side of the aisle. In the first half of the session, calls have emerged as the options of choice, with roughly 4,500 contracts changing hands -- representing 11 times their average intraday volume. As a point of comparison, only around 2,800 puts have crossed the tape.


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