Trader sees Office Depot on the mend

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Office Depot is trying to fix its business model, and one trader is betting that it will succeed.

optionMONSTER's tracking programs detected the sale of 2,500 October 2.50 puts for $0.25 against open interest of just 22 contracts. The trader is now obligated to buy shares of the office-supply retailer for $2.50 if they fall below that level.

If they remain above it, however, he or she will get to keep the $0.25 credit as the puts expire worthless. The put sale is an example of how investors can use options to make money from the passage of time without spending cash up front. (See our Education section)

ODP is up 2.72 percent to $3.21 today. Shares rallied about 70 percent between the start of the year and late March, then retreated. This week they bounced around the same $3 level where they consolidated in February and found support after pulling back the next month.

The stock also peaked around $2.60 in October, which could be leading some chart watchers to expect support around that level and help explain today's trade.

Management has been taking steps to improve margins by cutting expenses and selling fewer items at discount prices. That allowed its last earnings report on Feb. 28 to beat expectations.

The put sale accounted for almost all the option volume in ODP today and pushed its total activity to more than twice the average amount.



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

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


This article appears in: Investing , Options

Referenced Stocks: ODP

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