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.
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.
Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.