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TheStreet Open House

Long-Term Bet on Office Depot

Stocks in this article: ODP

By David Russell of  OptionMonster

NEW YORK -- Office Depot (ODP) is up sharply this week, and the bulls are piling in for the long term.
 
OptionMonster's tracking systems detected the purchase of about 16,000 January 2016 5 calls for $1.25 and $1.30 on Thursday. Volume was more than 10 times the previous open interest in the strike, which indicates that new money was put to work.
 
These long calls lock in the price where ODP shares can be purchased, letting investors cheaply position for a rally in the next 18 months. The contracts can also generate significant leverage if the stock moves in the right direction, but they can expire worthless if shares decline.
 
Office Depot rose 1% to $5.05 on Thursday and is up 22% in the last week. Most of that move came after earnings and revenue beat expectations on Tuesday. The office-supply retailer also raised guidance, citing cost synergies from its acquisition of OfficeMax.
 
Total option volume in Office Depot Thursday was triple its daily average for the last month. Overall calls outnumbered puts by a bullish 75-to-1 ratio.
 
Russell has no positions in ODP.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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