Shares of United Rentals are holding above $8 as traders reposition their risk.
United Rentals is down 1.7 percent to $8.09 after topping out on Friday at 8.43, the highest level for the stock since January 8. Shares were as low as $2.52 on March 6 and have had a nice run since then.
Our systems pinpointed significant action in the September calls, with a spread trade involving the 7.5 and 10 calls. We see 7000 of the 10 calls purchased in one block for 0.35. This was against open interest of 4392, so it clearly involves opening new positions. Seconds later one block of 4229 of the 7.5 calls were sold for 1.10. This action is against open interest of 5972 contracts.
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Because of this, it is likely that this trader is selling to close long calls that were held at the 7.5 strike and buying the 10 calls. In doing so they lock in a nice profit, lower their risk, and get more “bang for their buck” in the event of further significant increases.
For more advanced options traders, this latter comes with a greater delta in relation to option price, and a greater gamma compared to delta. (For more on this topic, check out our Education section and specifically our chapter on the "greeks.")
No immediate information was available for McKhann or his firm.
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Chris McKhann is an analyst and writer for OptionMonster.