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.