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Staples receives vote of confidence

David Russell (david.russell@optionmonster.com)

One investor is confident that office-supply retailer Staples is bottoming out.

optionMONSTER's tracking programs detected the sale of 3,000 March 12 puts for $0.90. An equal number of December 12 puts was bought at the same time for $0.25 but volume was below open interest in those. The activity suggests that an existing short position was closed and rolled forward in time.

It appears the investor had previously sold the December contracts, looking for the stock to remain above $12. But now, with SPLS down 2.48 percent to $11.81 in afternoon trading, he or she faces the possibility of being forced to buy shares at the close tomorrow.

The options were adjusted to avoid that from happening. Because the trader added three months to the position, he or she was paid $0.65 to compensate for the prolonged downside risk. (See our Education section for more on how options can be used to turn time into money .)

SPLS has been working its way lower for years amid increased competition and weak demand, but it's been holding its ground at an eight-year low around $11 since the summer. That could make some chart watchers think downside is limited and make them willing to sell puts.

Total option volume is triple the daily average in the name so far in the session.

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