Rock-Tenn has pulled back to a key level, and one bull is taking
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
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
Overall option volume in the name was 31 times greater than average
in the session, with calls outnumbering puts by the same ratio.
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