For millions of white-collar workers, the COVID-19 crisis may have been a cynical godsend because it ushered in a new paradigm: working from home (WFH). While the technology always existed, let’s be real – upper management teams have always been skeptical about the productivity drain associated with a lack of physical presence-related oversight and accountability. Of course, the SARS-CoV-2 virus forced their hands.

Now, as fears of the crisis fade, many companies want their workers to return back to the office. Naturally, the matter has sparked considerable pushback, with corporate employees arguing left and right about their newfound increased productivity. However, the objections also clash against longstanding skepticisms regarding the accountability-and-social-behavior relationship. As law enforcement officers are finding out, trusting people has led to an increase in various infractions.

Given the understandable tension between employers and employees regarding WFH, Office Properties Income Trust (OPI) stands at an awkward juncture. A real estate investment trust or REIT, Office Properties focuses on owning, operating and leasing buildings primarily leased to single tenants and those with high credit quality characteristics like government entities.

Interestingly, years prior to the pandemic, OPI stock represented a wildly choppy and volatile investment. Of course, the COVID-19 crisis and the subsequent normalization of WFH did OPI and the underlying industry absolutely no favors. However, with grumblings about future monetary policy making many investors jittery, could Office Properties become an unexpected catalyst for upside speculation?

Intriguing Options Action Zeroes in on OPI Stock

One clue to use when deciphering potential forward moves in the market is to assess Barchart’s screener for unusual stock options volume. While no indicator provides a guarantee, increased interest among the smart money toward a particular opportunity may signal big swings ahead.

Following the close of the July 18 session, OPI stock ranked among the highlights in the above-mentioned screener. Specifically, total volume reached 3,829 contracts versus an open interest reading of 14,738. Moreover, the delta between the Tuesday session volume and the trailing one-month average metric came out to 681.43%.

Drilling down, call volume hit 3,709 contracts versus put volume of 120. This pairing yielded a put/call volume ratio of 0.03, on paper indicating bullish sentiment. However, at time of writing, the put/call open interest ratio stands at 1.04, suggesting bearish sentiment. That’s hardly a surprise, though, with OPI stock shedding nearly 43% of equity value since the beginning of this year.

Still, after getting beaten down for so long (it slipped more than 60% in the trailing one-year period), extreme contrarians might be interested in testing the idea of going against the grain. Notably, options flow data shows that on June 26, traders engaged in a multi-sweep transaction for bought calls, a classic bullish tactic.

Finally, the implied volatility indicator for OPI stock has been steadily rising since the June 22 session. This dynamic possibly suggests that greater option price movement is expected. With more traders targeting the contrarian angle, Office Properties could entice the most intrepid gamblers.

Not for the Faint of Heart

To be clear, going long OPI stock on the assumption that the workplace will normalize is not for the faint of heart. Quite frankly, those that took said bet have suffered tremendously. Further, some headline stats undergirding Office Properties imply that it’s a value trap.

For example, the market currently prices OPI stock at a trailing-year sales multiple of 0.71. This appears incredibly cheap compared to the underlying sector. However, one must also factor in the revenue growth or lack thereof. In the first quarter of 2023, Office Properties posted $132.4 million on the top line, down more than 10% from the $147.4 million posted in the year-ago period.

Also, OPI stock trades at 0.29X book value and 1.74X cash flow. While these stats seem discounted, if the business continues to fade, they might ensnare unsuspected investors into a bad deal. But the question is, is OPI really a bad deal?

I’m not so sure. While the June jobs report came in softer than economists expected, certain metrics such as fading unemployment and stabilized wage growth ultimately at scale create a circumstance where more dollars are chasing after fewer goods, the exact opposite of what the Federal Reserve wants to see. Therefore, it’s possible that the central bank will raise interest rates again.

If so, the disincentivized business expansion narrative may lead to more layoffs, which then puts power back into the hands of employers. Because American households are already dealing with record debt loads, employees arguably need employers more than the other way around.

Under this circumstance, the workplace might normalize. If you really have high conviction about this narrative, OPI stock may be the gamble of the year.

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