I don't know Jim, but check this out:
Friday June 27 4:23 PM EDT
U.S. OPTIONS FOCUS/Bet made on big ODP share drop
CHICAGO, June 27 (Reuter) - A big institutional investor appeared to bet on a decline in shares
of Office Depot Inc (ODP) amid talk a ruling on its proposed merger with Staples Inc (SPLS)
would come soon, options traders said Friday.
In afternoon trade, Office Depot shares were up 3/16 at 19-7/16 on nearly 1.5 million shares in
consolidated trading. Staples rose 1/8 to 23-11/16 on more than one million shares.
U.S. District Court judge Thomas Hogan said he would rule by mid-June on whether to grant the
government a preliminary injunction to halt the office superstores' proposed merger.
The U.S. Federal Trade Commission is challenging the merger, contending it would lead to higher
prices. A five-day hearing before Hogan was held in mid-May.
Activity in Office Depot options was led by the July 15 and July 17-1/2 puts, which traded 26,050
and 22,450 contracts, respectively.
The July 15 put had open interest of 54,648 and the July 17-1/2 put had open interest of 15,312.
One trader said a U.S. investment firm bought the July 17-1/2s and sold the 15s.
``That's a little frightening,'' another options trader said of the investment firm's activity. ``I guess
this is a debacle waiting to happen. It's sure starting to smell like it.''
Michael Schwartz, a managing director at Oppenheimer & Co, said the institution was likely rolling
the put position up from the 15 strike to the 17-1/2.
``I would venture to say they're rolling up in anticipation of a negative announcement,'' he said.
``Arbitrageurs rolling up their puts to protect their positions.''
The second trader added that the put options' pricing also suggested players were expecting a
drop in Office Depot shares.
The July 12-1/2 puts, which had volume of 3,565 contracts, were trading at 3/16, down 1/16.
``What are they trying to tell me here?'' the trader said. ``If this deal falls apart, this stock is down
below 12-1/2?''
Some clients were doing buy-writes on Thursday and others were selling puts, he said. A
buy-write involves buying the stock and selling calls.
The action in Office Depot options was not limited to the put side.
The July 20 calls traded more than 11,000 contracts and the July 17-1/2s traded 3,380. In the
October series, the October 17-1/2 call traded 3,530 contracts and the October 20 call traded
1,325.
Staples options, listed on the Philadelphia Stock Exchange, were thinly traded, with the most
action in the July 20 call and put, each of which traded 125 contracts. |
