Bulls return as Office Depot climbs


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Office Depot has been fighting its way higher since December, and Friday it was back on the Heat Seeker.

More than 9,600 March 6 calls traded against open interest of 1,651 contracts. The first trades priced for $0.30, but premiums rose steadily with the stock price and  ended the session at $0.50.

ODP The office-supply retailer first lit up our screens back on Dec. 22 when buyers snapped up January 5.50 calls. The shares proceeded to rally more than 20 percent in the next two weeks before pulling back. ODP has done everything right technically since then, finding support at the same $5 level that was formerly resistance and firmly establishing itself above its 200-day moving average (purple line on chart).

The next big test comes when the company reports fourth-quarter earnings on Feb. 22. Its numbers have generally been weak, and guidance was below forecasts the last time management provided an outlook on Oct. 25.

The recent bullishness is probably tied to hopes of more customer demand as the economy improves. There's also a hefty short interest that could be causing some bears to cover their bets--especially after the stock made a higher low at $5 last month.

ODP ended Friday's session up 4.66 percent to $6.07. Overall option volume was 12 times greater than average, with calls accounting for 94 percent of the total.

(A version of this post appeared on InsideOptions on Friday. Chart courtesy of tradeMONSTER.)

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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This article appears in: Investing Options
Referenced Stocks: ODP

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