Bull adjusting position in Rock-Tenn

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Rock-Tenn has pulled back to a key level, and one bull is taking another shot.

optionMONSTER's Heat Seeker tracking system detected a surge of call volume in the packaging company, which reports earnings after the bell on Aug. 5. Four thousand January 85 calls were sold for $0.50 against existing open interest.

At the same time, 2,000 October 65 calls were bought for $2.60 and 2,000 October 75 calls were sold for $0.50. It appears that an existing position in the January contracts was closed and moved a call spread at the lower strike. (See our Education section)

The transaction was probably the work of an investor who had purchased the January 85 calls earlier in the year when RKT was trading higher. Yesterday's adjustment will increase their odds of making at least some profit from the company, which makes cardboard for packaging and in-store displays.

The stock ended the session up 1.44 percent to $60.69 but is down more than 21 percent since hitting an all-time high over $78 at the end of May. RKT has enjoyed strong revenue growth but last quarter missed earnings forecasts after higher costs squeezed profit margins.

Another key factor driving the shares has been RKT's purchase of larger rival Smurfit-Stone, which put the company at the top of the North American paperboard market.

The shares are also back near the $60 area where they peaked in late 2010. That could make some chart watchers believe that the stock is finding support at old resistance in a bullish technical sign.

Overall option volume in the name was 31 times greater than average in the session, with calls outnumbering puts by the same ratio.



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: RKT

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