Rackspace Hosting has gotten crushed, but one investor is
looking for a rebound.
optionMONSTER's Heat Seeker monitoring system detected the purchase
of 2,500 December 46 calls for $4.70 and the sale of an equal
number of December 38 puts for $3.70. There was no open interest in
either strike before the trade occurred.
The transaction cost a net $1 and is similar to owning shares in
the provider data-hosting services. The
will make money if RAX climbs while the
will lose money to the downside.
Unlike owning shares, the position will track movements in the
stock price less closely as
and expire worthless if it stays between $38 and $46. (See our
RAX is down 2.85 percent to $41.92 in midday trading. The stock has
lost 27 percent of its value since the beginning of last month
after a poor earnings report on May 7. But the shares are now back
to an area where they consolidated in December and January, which
could be leading some chart watchers to expect them to find
Earlier in the week the
puts were bought for $6.75, and those same contracts had
appreciated to $8.40 by early today. Traders also tripled their
money in the
puts over a longer time horizon.
Overall option volume is almost 4 times greater than average in RAX
so far today.
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