Bears think Rock Tenn is boxed in

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Rock Tenn has been slowing, and now the bears are stepping in.

optionMONSTER's Depth Charge tracking program detected the purchase of 1,000 October 65 puts for $2.90 and the sale of an equal number of October 60 puts for $1.05. Volume was more than 15 times open interest at both strikes.

Known as a bearish put spread , the trade cost $1.85 and will earn a maximum profit of 170 percent if the packaging company closes at or below $60 on expiration. (See our Education Section for more on how to generate leverage using options.)

RKT fell 0.54 percent to $66.18 in morning trading. It peaked around $74 in March, then fell below $50 by early June. The stock has been rebounding since then, and has chalked up a 28 percent gain in the last three months.

The shares have been about flat in the last two weeks, however, which could make some traders expect a drop. A put spread would be an effective way to profit from such a move.

Overall option volume is 12 times greater than average so far today, with puts accounting for all the activity so far.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


This article appears in: Investing , Options

Referenced Stocks: BOX

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