Staples Inc. (NASDAQ: SPLS )
closed up 24 cents, or nearly 1%, to $25.93 on the day Thursday
despite the broader market sell-off, but at least one investor
expressed moderate bearishness on a bet that the stock's strength
could diminish in the near-term.
An investor bought the April 24-26 one-by-two put spread 5,000
times around 3:17 p.m. yesterday. The investor paid roughly 40
cents per spread. This means the investor bought the 26-stike puts
for $1 per contract 5,000 times and sold twice as many April
24-strike puts for 30 cents per contract for a combined debit of 40
cents per transaction.
The April 24 puts closed down five cents on the day, and were
home to open interest of 10 contracts. The April 26 puts closed
down 12 cents and were home to open interest of just seven
contracts, indicating the investor traded these options to open.
This morning, open interest of the April 24 puts has climbed to
10,000 contracts, while the 26-strike puts saw open interest spike
to 5,000 contracts.
Implied volatility of the 24-strike puts was 27%, and the
26-strike puts closed with an implied volatility of 22%.
Investors who bought this put spread are protected against a
major rise in the stock because maximum risk on this trade is 40
cents if the stock pops higher than $26. Investors make a maximum
profit of $1.60 per spread (the difference between the strike
prices minus the premium paid) if the stock closes right at $24 at
April options expiration. If the stock closes below $22.40,
investors could incur unlimited losses because the investor would
be short more puts than he is long.
Though this trade looks like a lot of put volume at face value,
investors bought some of the puts and sold others, so that is why
we say that this is
bearish instead of exceedingly bearish.