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Bulls look for Staples to rebound

David Russell (david.russell@optionmonster.com)

Staples has taken a beating, but the bulls think it's ready to bounce.

optionMONSTER's Heat Seeker monitoring system detected the purchase of more than 4,700 May 13 calls, most of which priced for $0.20 and $0.25. Volume was more than 13 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 investors can buy shares, letting them benefit from a rally in the office retailer at low cost. He or she also stands to earn significant leverage from the stock pushing higher, but the contracts could expire worthless if shares remain below $13 through mid-May. (See our Education section)

SPLS is down 1.4 percent to $11.99 in afternoon trading and is down 25 percent so far this year. Much of that drop followed a poor earnings report one month ago.

The stock then managed to hold the same $11 level where it consolidated in late 2012 and started rebounding last week. That could make some chart watchers think that the stock will keep climbing.

The next earnings report comes on May 20, after today's contracts expire.

Total option volume is still below average in the name, but calls outnumber puts by a bullish 14-to-1 ratio.

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