Options Brief: Office Depot (ODP)

ODP – Office Depot, Inc. – Investors expecting Office Depot’s share price to head higher purchased in- and out-of-the-money call options on the retailer of office supplies during morning trading even though the price of the underlying stock declined as much as 2.5% to touch an intraday low of $3.94 before 11:00 am (ET) today. Plain-vanilla call buyers should pat themselves on the back because ODP’s shares have since reversed course to rally more than 4.95% in the past hour to trade at $4.24 as of 11:50 am (ET). Bullish traders scooped up more than 1,300 in-the-money calls at the August $4.0 strike for an average premium of $0.50 per contract. Investors long the calls make money if Office Depot’s shares rally above the average breakeven price of $4.50 by August expiration. Longer-term optimistic individuals purchased at least 2,500 calls at the higher January 2011 $5.0 strike for a premium of $0.50 a-pop. Traders are prepared to accrue profits if the retailer’s shares surge 29.7% over the current price of $4.24 to trade above the average breakeven price of $5.50 by expiration day in January 2011.