Back to Main

Put buyers loading up at Staples

By: optionMONSTER
Posted: 5/18/2010 2:06:00 AM
Referenced Stocks: SPLS

Staples reports earnings Thursday morning, and traders are positioning for a drop.

optionMONSTER's Depth Charge tracking system detected the purchase of 4,600 June 21 puts for $0.75 and the sale of an equal number of June 19 puts for $0.25, resulting in a net debit of $0.50. Volume was more than three times open interest in both strikes.

SPLS Chart The so-called put spread will earn a maximum profit of 300 percent if SPLS closes at or below $19 by expiration.

The office supply retailer fell 0.36 percent to $21.20 yesterday and is down 13 percent in the last three months. It gapped lower after its last earnings report on March 2 when management issued disappointing guidance because of weak demand. UBS cut its forecast on May 10, citing the weak euro.

SPLS has been falling since failing to break the same $26 level that has served as resistance since 2008. The stock has been consolidating below its 200-day moving average this month, which may cause some chart watchers to expect a steeper decline.

Rival Office Depot has also been falling on weak results, while OfficeMax has been outperforming the group.

The Depth Charge also detected the purchase of about 4,250 May 22 puts on SPLS for $0.70 and $0.75, though it's not clear whether the position was opened or closed because volume roughly matched open interest.

More than 14,600 contracts traded overall in the name--almost five times the average level. Puts accounted for a bearish 99 percent of the activity.

(Chart courtesy of tradeMONSTER)