Staples Options Could Supply Profits

Small-business supplies supplier Staples (NASDAQ: SPLS ) is due to move up as the economy recovers. The news has been solid though uninspiring for the firm, kind of like the economy in general. The fight for Staples appears to be a slow and steady one, not a sudden win. Options trading investors may consider looking at calls further down the 2011 road to profit from a steady rise in Staples stock. The company reported early this month fourth quarter 2010 net income of $275 million, up 17% from same period in 2009, while revenues were flat at $6.4 billion. For full year 2010, the company reported sales of $24.5 billion, also flat from the 2009. SPLS also announced an increase in its quarterly cash dividend to 10 cents a share. Staples forecast 2011 sales to increase in the low- to mid-single single digits compared with 2010. Earnings per share were projected at $1.50 to $1.60 this year, up from $1.21 for 2010. Staples' stock was late to the market rally that began last September, and ended hitting a high of $23.68 in January. Since then it has fallen and closed yesterday at $19.33. Give Staples a little time to make its climb higher. The September call options – at and near out-of-the-money strikes – can be attractive here as the stock returns to the upside. The Septembers have already garnered some decent open interest, suggesting investors are watching SPLS. The SPLS Sep 22 Calls were offered at 70 cents today with the stock at $19.43. The stock would need to rise 16.8% to hit $22.70, the break-even point for a buyer. Find more analysis and trading ideas at Option Trading Strategies .
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