Sarah Wasserman (swasserman@sir-inc.com) Staples, Inc. (SPLS) is scheduled to report its third-quarter earnings ahead of the open on Thursday, Nov. 18, with analysts looking for a profit of 40 cents per share. SPLS has a checkered history in the earnings spotlight; in the past four quarters, the company has twice surpassed, once met, and once fallen short of, the consensus estimate.
While earnings can often have a major effect on a stock, it seems that one option player is actually betting on minimal movement from SPLS over the next few months. Early this morning, 452 December 20 puts, marked "spread," crossed the tape at the bid price, while 452 January 2011 20 puts, also deemed "spread," changed hands at the ask price. In other words, it appears that this trader initiated a long calendar spread with puts on SPLS.
In this example, the trader is ultimately betting that SPLS will remain pegged at the $20 level until December expiration. As such, the option player hopes to buy-to-close the December 20 puts just before expiration, and simultaneously sell-to-close the January 2011 20 puts. In this play's best case scenario, the trader will collect a substantial premium for the January puts (due to built-in time value) -- which will (hopefully) exceed both the cost of repurchasing the December puts and the initial premium.
For the record, SPLS has been trading between $20 and $21 since mid-September. The stock is currently perched at $20.10.
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