Markets

Trader calling a top in Rent-A-Center

Rent-A-Center has rallied back to potential resistance, and one trader apparently thinks that it's done going up.

optionMONSTER's tracking systems detected the sale of about 11,800 December 35 calls against open interest of just 290 contracts. The first blocks priced for $0.40, but the premiums then fell to $0.35 where the largest trade priced. That confirms a strong selling pattern was at work.

RCII fell 1.17 percent to $28.66 yesterday. The rent-to-own company reported weaker-than-expected earnings and revenue on July 25. Management also cut guidance.

The shares gapped lower the next day, followed by a push all the way to below $22 by early August. They rebounded by more than 30 percent but are now stalling around the same level where they had support in June, and the stock seems to be making a lower high. RCII is also trapped below its 200-day moving average.

Some chart watchers may consider this evidence that the shares are rolling over. Selling calls is a common way to profit from such an expectation and, in this case, the investor will get to keep the premium as long as it stays below $35 by expiration. (See our Education section)

The transaction pushed overall option volume in the name to more than 150 times the daily average in yesterday's session.

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

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

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