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