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October 17, 2011  Mon 12:21 PM CT

SPLS: SEE CHART GET CHAIN FIND STRATEGIES
Investor unloads office retailers

One large player is apparently giving up hope on the office-supply retailers.

optionMONSTER's monitoring programs detected heavy call selling today in Staples, OfficeMax, and Office Depot. All the activity came against existing open interest, which suggests that existing long positions were closed.

All three saw about 10,000 contracts sold. The January 16s traded for $0.70 in SPLS, while OMX's January 7.50s changed hands for $0.20. In ODP, they sold the January 3 calls for $0.10.

The industry has been struggling with a weak economy, but recent data shows improvement as management teams reduce costs and seek to realign their business models. They have still lagged most other retailers and now sit near multi-year lows.

SPLS is off 2.72 percent to $14.47 in afternoon trading. OMX is down 5.62 percent to $4.70, and ODP has fallen 3.94 percent to $2.08.

Based on today's option activity, one investor is abandoning a bet on the sector. By closing the position now, he or she will be spared the accelerating pace of time decay that will occur as expiration approaches. The trader will also avoid premium compression if volatility in the broader market continues to decline.  (See our Education section)

Volume was 22 times greater than average in ODP, 5 times average in OMX and triple the normal amount in SPLS.
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