Rite Aid faces range-bound trade

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Traders think Rite-Aid needs to rest after a blistering run in the last 12 months.

optionMONSTER's trade scanners detected the sale of 30,000 April 5 calls for $0.85 and 30,000 April 5 puts for $0.60. Volume was more than quadruple open interest at both strikes, indicating that new positions were initiated.

The trader collected a credit of $1.45, which he or she will keep as profit if the pharmacy stock closes at $5 on expiration next spring. Gains erode on either side of that level, turning to losses below $3.55 and over $6.45. (See our Education section for more on the trade, known as a short straddle .)

RAD rose 0.58 percent to $5.21 yesterday and is up 375 percent in the last year. Once struggling to survive, the company has been improving its operations in recent quarters as same-store sales and margins improve.

Shares are now back around the same level where they peaked in 2003 and 2007, which could make some chart watchers think that they're due for a pause.

Total option volume was 7 times greater than average in the session.



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: RAD

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