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Investors Stock Up on Office Depot Calls

ODP's positive price action lures call players to the table

by 2/9/2012 1:01 PM
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Call players have targeted Office Depot (ODP - 3.16) today, as more than 3,100 of these options have been traded so far, which is 10 times above the norm. Upwards of 1,300 calls crossed at the near-the-money March 3 strike -- nearly all of them at the ask price, indicating they were bought. Currently, this option carries peak call open interest of just 235 contracts, so it's safe to say that new positions are being initiated here today. By purchasing these calls to open, speculators are wagering that the stock will continue its rise above the $3 level through March expiration.

ODP calls have been the options of choice well before today, however. The Schaeffer's put/call open interest ratio (SOIR) checks in at 0.30, conveying that calls more than triple puts among options scheduled to expire within three months. This ratio ranks in the 38th percentile of its annual range, which means that short-term options players have been more bullishly slanted toward the stock just 38% of the time within the past 12 months.

Meanwhile, short interest on the office product giant rose by 5.54% during the most recent reporting period, and now accounts for a lofty 10.8% of ODP's float. This implies that some of the equity's call volume may be the result of hedging activity by short sellers. Either way, it would take seven and a half days to cover these shorted shares, at the stock's average daily trading volume.

From a technical standpoint, ODP is off to an excellent start in 2012, having added around 47% so far this year, and outpacing the broader S&P 500 Index (SPX) by more than 24% during the past 20 sessions. What's more, the stock is poised to close a fifth consecutive session above its 200-day moving average, a trendline that had been largely out of reach since late March.

In the afternoon hours of the session, ODP is up about 3.6% to trade at $3.16.


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