Office Depot has been fighting its way higher since December, and Friday it was back on our tracking systems for unusual option activity.
More than 9,600 March 6 calls traded against open interest of 1,651 contracts. The first trades priced for $0.30, but premiums rose steadily with the stock price and ended the session at $0.50.
The office-supply retailer first lit up OptionMonster's screensback on Dec. 22 when buyers snapped up January 5.50 calls. The shares proceeded to rally more than 20 percent in the next two weeks before pulling back. The stock has done everything right technically since then, finding support at the same $5 level that was formerly resistance and firmly establishing itself above its 200-day moving average.
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The next big test comes when the company reports fourth-quarter earnings on Feb. 22. Its numbers have generally been weak, and guidance was below forecasts the last time management provided an outlook on Oct. 25.
The recent bullishness is probably tied to hopes of more customer demand as the economy improves. There's also a hefty short interest that could be causing some bears to cover their bets—especially after the stock made a higher low at $5 last month.
Office Depot's shares ended Friday's session up 4.66 percent to $6.07. Overall option volume was 12 times greater than average, with calls accounting for 94 percent of the total.
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David Russell is a reporter and writer for OptionMonster.
Russell has no positions in ODP.