Rite Aid (RAD) Option Bulls Come Out Swinging

Rite Aid Corporation (RAD) calls are flying off the shelves

Mar 18, 2015 at 11:59 AM
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The shares of Rite Aid Corporation (NYSE:RAD) are bucking the broad-market trend lower today, up 4.6% at $8.24. Upon news of a rewards partnership with American Express Company (NYSE:AXP) and other notable names, RAD option bulls have come out swinging, with calls flying off the shelves at a rapid-fire rate.

Roughly 191,000 RAD calls have traded thus far -- 64 times the average intraday call volume. Short-term options are in demand, as the equity's 30-day at-the-money implied volatility has surged 26.5% to an annual high of 61.6%. In fact, the 10 most active strikes are calls, and seven of those expire within the next two months.

Most active by a mile is the April 9 call, which accounts for more than 147,000 of the contracts traded. Possible buy-to-open activity has also been detected at the March and April 8 calls. By buying the April 9 call, the speculators expect RAD to muscle atop the strike -- a feat not accomplished in nearly 14 years -- by the close on Friday, April 17, when the options expire. By purchasing the at-the-money 8-strike calls, the buyers expect RAD to extend its ascent north of the strike through the respective expiration dates.

On the charts, Rite Aid Corporation (NYSE:RAD) has added nearly 10% in 2015, and stands within a stone's throw from new highs. However, the equity could run into a familiar speed bump in the $8.50 area, which smacked the shares lower in mid-2014 and halted M&A-inspired rally attempts in February.

Weekly Chart of RAD since March 2014
 

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