Trader positions for Rackspace rebound


Shutterstock photo

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 long calls will make money if RAX climbs while the short puts will lose money to the downside.

Unlike owning shares, the position will track movements in the stock price less closely as time passes and expire worthless if it stays between $38 and $46. (See our Education section)

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 support.

Earlier in the week the September 49 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 June 50 puts over a longer time horizon.

Overall option volume is almost 4 times greater than average in RAX so far today.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.

This article appears in: Investing , Options

More from optionMONSTER




Follow on:

Find a Credit Card

Select a credit card product by:
Select an offer:
Data Provided by