As I mentioned on CNBC's "Halftime Report" and "Fast Money" on Friday, the action started early in the morning when Staples saw more than 12,000 December 14 calls traded for 30 cents and 35 cents in volume far above the previous open interest of 2,755 contracts. Those calls topped 18,000 by the end of the session, with premiums reaching 50 cents, according to OptionMonster's tracking systems.
The bulls then turned to Office Depot in the afternoon as one big player opened a huge combination trade. Our scanners detected the purchase of 25,000 October 6 calls on the ask for 20 cents and the sale of 25,000 October 5.50 puts for the bid price of 15 cents, both far above open interest.
Long calls lock in the price where a stock can be purchased no matter how far it might rise. The contracts could be sold at a profit with a rally anytime before they expire, but they will lose value if shares pull back.
Staples gained 3.48% to $12.94 on Friday. Office Depot jumped 4.8% to $5.90, a penny off a new 52-week high reached just before the close.
Both stocks gapped up on Sept. 2 after a note by Credit Suisse raised speculation of a deal between the office-supply retailers. The two names saw bullish option activity at that time as well.
Friday's total option volume in Staples was more than six times its daily average, with calls outnumbering puts by 8 to 1. Office Depot's overall volume was 28 times its daily average as calls well outpaced puts.