Rackspace Hosting is hitting a new all-time high, but one
investor is taking the other side of the trade.
optionMONSTER's Depth Charge monitoring program detected the
purchase of 5,000 January 2014 50 puts for $7.90 and the sale of
5,000 January 2014 30 puts for $2.05. Volume was more than 45 times
open interest at both strikes.
Known as a
bearish put spread
, the trade will leverage a major correction in the cloud-computing
stock. It cost $5.85 and will earn a maximum profit of 242 percent
on a drop to $30--less than half the current share price.
RAX is up 1.94 percent to $63.20 in late morning trading and has
advanced more than 40 percent in the last three months. The
company, which focuses on small and mid-sized businesses, has been
growing at a breakneck pace and has trended steadily higher since
Today's bearish trade could be the work of a long-term investor
who's made money in the name and now wants protection in case its
performance weakens. (See our
Overall option volume in RAX is 6 times greater than average so far
today, with puts outnumbering calls by 17 to 1.
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.
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