Options Traders Anxious Ahead of Staples, Inc., Office Depot Inc Ruling

A judge is expected to rule later today on the merger between Staples, Inc. (NASDAQ:SPLS) and Office Depot Inc (NASDAQ:ODP)

May 10, 2016 at 2:31 PM
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The fate of a Staples, Inc. (NASDAQ:SPLS) and Office Depot Inc (NASDAQ:ODP) union could be decided upon later this afternoon, with a judge expected to issue a ruling on the highly contested merger by 4:30 p.m. ET. Ahead of the looming announcement, SPLS stock is up 0.7% at $10.37 -- while ODP is down 3.5% at $6.04 -- and anticipation is building in the former's options pits. In fact, SPLS' 30-day at-the-money implied volatility topped out at a 52-week peak earlier.

By the numbers, roughly 9,000 calls have changed hands today -- 1.3 times the average intraday pace -- compared to about 3,500 puts. Most active is SPLS' September 14 call, where it looks like one options trader bought to open a 5,000-contract block for $175,000 (number of contracts * $0.35 premium paid * 100 shares per contract). This also represents the options trader's maximum risk, should the stock stay south of $14 through September options expiration.

More broadly speaking, put buyers have been taking aim at SPLS at a faster-than-usual clip in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 0.46 ranks in the 86th percentile of its annual range.

What's more, SPLS' Schaeffer's put/call open interest ratio (SOIR) is docked at 1.27. Not only does this show that puts outweigh calls among options expiring in three months or less, but it ranks above all other comparable readings taken in the past year. Simply stated, short-term speculators are more put-heavy now toward SPLS than they've been at any other point over the last 12 months.

On the charts, Staples, Inc. (NASDAQ:SPLS) has been a long-term laggard, shedding nearly 38% year-over-year amid pressure from its 50-day moving average. While this trendline gave SPLS stock a quick lift from February through April of this year, it appears to have resumed a more resistive role.

SPLS daily chart

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