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Rite Aid Corporation (NYSE:RAD) options were unusually active yesterday, as volume ramped up to more than three times the stock's daily average. About 31,000 calls and 11,000 puts changed hands, and traders showed a particular interest in weekly options on RAD.
The day's top three RAD option strikes were all in the weekly 8/1 series -- specifically, the 7.50 call, the 6.50 put, and the 7 call. Traders were apparently buying to close short calls at the out-of-the-money 7.50 strike, where open interest tanked overnight by more than 10,000 contracts. Meanwhile, data from the International Securities Exchange (ISE) confirms some sell-to-open activity at the 6.50 put, and buy-to-open volume at the 7-strike call. (Open interest at both strikes rose by upwards of 3,000 contracts overnight.)
In other words, Wednesday's speculators were taking a generally optimistic stance on RAD by closing out their short calls, while adding new short puts and long calls. Checking out the charts, the stock is fractionally higher this morning to trade at $6.70, paring earlier gains in the wake of the drugstore chain's monthly same-store sales results.
Shares of Rite Aid Corporation (NYSE:RAD) have gained 32.4% so far in 2014, but they're down more than 22% from their June peak at $8.61. The stock was targeted by a September 9 call writer last week, with at least one trader betting against RAD to rally above this multi-year high during the short term.