One investor is turning time in to money, using tech stock
optionMONSTER's monitoring programs detected the purchase of 1,500
December 37 calls for $6.72 against open interest of 2,381
contracts. A block of 1,500 March 38 calls was sold at the same
time for $7.64, resulting in a net credit of $0.92.
The investor probably owns shares in the company and had previously
sold the December contracts to earn income and manage risk in a
strategy. (See our
Friday's action rolled the position to March, which continues the
trade for another three months longer. In addition to the $0.92
credit, the investor also gained the right to collect an additional
$1 of upside on the stock by raising the strike price at which his
or her shares must be sold.
Covered calls are a common way that investors manage risk and are
frequently done in names such as RAX that are in steady uptrends.
The interesting thing about this option trade is that strike prices
deep in the money
, which means that the investor's gains are protected even if the
stock falls significantly.
RAX climbed 3.99 percent to $44.02 on Friday and is up 46 percent
in the last year. The company, which provides data-hosting
services, has beaten estimates the last two times it reported
Total option volume was twice the average amount on Friday, with
calls accounting for almost three-quarters of the activity.
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