One investor is turning time in to money, using tech stock Rackspace Hosting.
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.
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 are 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 results.
Total option volume was twice the average amount on Friday, with calls accounting for almost three-quarters of the activity.
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