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Staples, Inc. (NASDAQ:SPLS - 14.40) is flying high in today's session on some sector-related merger-and-acquisition news, and option players are betting on a longer-term uptrend. Roughly 37,000 calls have crossed the tape so far, or more than nine times their average intraday volume. Bulls are eyeing the overhead 15 mark, and are scooping up SPLS' April 15 and June 15 calls. The majority of the nearly 16,500 contracts that have collectively traded here have crossed at the ask price, and volume is easily outstripping open interest -- pointing to the initiation of new positions.
By purchasing the out-of-the-money April 15 calls for a volume-weighted average price (VWAP) of $0.56, traders will begin to profit with each step north of $15.56 (strike plus VWAP) SPLS takes through the close on Friday, April 19 -- when the options expire. This breakeven mark represents an 8.1% premium to the stock's current perch.
The VWAP of the June 15 calls is $0.95, making breakeven $15.95 -- or a 10.8% pop from present levels. Delta for these further-dated calls is docked at 0.46, or 46%, meaning the options market is giving the calls a nearly 1-in-2 chance of finishing in the money by expiration.
From a wider sentiment standpoint, option traders have taken a bearish stance toward SPLS in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open 9,470 puts, compared to 3,284 calls during the last 10 sessions. The resultant put/call volume ratio of 2.88 ranks higher than 91% of other such readings taken in the past year, suggesting puts have been accumulated over calls at a near annual-high clip.
Echoing this bearishly skewed bias is the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.61. Not only does this show that put open interest outweighs call open interest among options expiring in three months or less, but it ranks in the highest percentile of its annual range. In other words, short-term speculators are more put-heavy now than at any other time within the past year.
As touched upon, SPLS is soaring in today's session, after M&A news between sector peers Office Depot Inc (NYSE:ODP) and OfficeMax Incorporated (NYSE:OMX) prompted a bevy of bullish brokerage notes this morning. Today's price surge has helped pull the stock's year-to-date advance to an impressive 26.4%. Additionally, the equity was able to break through the $15 mark on an intraday trading basis for the first time since May 15.
SPLS has since pared some of these earlier gains, and was last seen lingering near $14.40. Should the stock fail to muscle above either breakeven mark by the respective expiration dates, the most today's call buyers have risked is the initial premium paid.