Rackspace Hosting is consolidating after a big run last year, and one trader is positioned for further upside before earnings.
optionMONSTER's Heat Seeker tracking system detected the purchase of about 3,100 September 20 calls for $1.15 and the sale of an existing position in an equal number of August 20 calls for about $0.65. This call-rolling strategy gave the trader an additional month of exposure to the web-hosting company for a net cost of $0.50.
RAX rose 0.88 percent to $19.48 in regular trading yesterday. It fell about 5 percent in extended trading after earnings and revenue narrowly beat analysts' forecasts.
The stock has mostly traded between about $16 and $20 since ripping into new bullish territory in September. It roughly quadrupled last year as money flooded into the so-called cloud-computing industry.
Rolling the calls forward let the investor avoid the accelerating pace of time decay that will occur as expiration approaches on Aug. 20. (See our Education section)
The trade came amid a busy session for RAX, which also saw active trading in the August 19 puts for $0.70 to $0.80 and the August 20 puts for $1.15 to $1.25. Both puts were sold early in the session, followed by purchases as the closing bell approached.
More than 20,500 contracts traded overall in the name, about 7 times average, according to optionMONSTER's data systems.
(Chart courtesy of tradeMONSTER)
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