The first day back from Labor Day weekend, and things are shaping up to be a busy day in the unusual option buying arena. One company with a large unusual call buy on Friday is seeing another large call buy this morning. That company is Staples, Inc (SPLS).
Just a little while ago we saw a trader buy 8,000 January $14 calls, paying 25 cents per contract. This large buy comes on the heels of a buy of 4900 October $12 calls for 25 cents on Friday morning. Todays transaction is valued in the area of $200,000, a nice sized bet in this boring office supplies company.
Staples, Inc (SPLS) is currently trading at $12.31 up 63 cents or 5.4%, on higher than average volume of over 4 million shares by 10 am. SPLS has a 52 week high of $16.67, and a low of $10.70 on the year. Credit Suisse, of course upgraded this stock early this morning going from neutral to Outperform and a price target raise from $11 to $15. Big surprise here as they are infamous for these kinds of shenanigans. You can bet they were involved in that big call buy on Friday ahead of their upgrade. That is just my PERSONAL unfounded opinion, of course.
Staples, Inc (SPLS) announces quarterly earnings on November 19, but clearly this is not a play on earnings leakage. These calls are now bidding 25 cents and asking 30 cents, last traded at 30 cents. So there is still time to get in on those Jan $14 calls. But we feel like this one is done, unless there is another big upgrade coming very soon. We’ll watch and maybe nibble if it comes down some. BTW, those calls bought Friday have more than doubled with the Oct. 12 calls bidding 55 cents.
17 analysts currently follow Staples, Inc (SPLS). The average rating on SPLS is a “HOLD” and the average price target is $11.07. We would expect that target and rating to rise soon, so a major firm may indeed be ready to announce a sizeable upgrade. SPLS is currently profitable with a PE of just 13 or so, with analysts expecting $0.37 per share profit for this quarter, and an annual profit of $0.97.
Keep on eye on SPLS and be ready to jump in, especially if you can get in at 25 cents like this mornings buyer.