Buyout Rumors Ignite Rackspace Hosting, Inc. (RAX) Options Pits

Buyout speculation has Rackspace Hosting, Inc. (NYSE:RAX) trading higher

by Josh Selway

Published on Mar 30, 2016 at 3:10 PM
Updated on Jun 24, 2020 at 10:16 AM

Call options are hot today on tech stock Rackspace Hosting, Inc. (NYSE:RAX), amid rumors the company may be a prime buyout target. The contracts are trading at 10 times the average intraday pace, topping put volume by a factor of nearly 13.

The weekly 4/1 21.50-strike call is the most popular RAX option, and data suggests buy-to-open activity here. To put it simply, traders are betting on RAX to continue its hot streak through the end of this week, when the options expire. 

Normally it's put buying that dominates the stock's options pits. For instance, RAX's 10-day put/call volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands at 1.58 -- in the 73rd percentile of its annual range

Elsewhere, short interest has been rising on RAX. In fact, short interest jumped by over 38% during the two most recent reporting periods, and it would now take these bears almost six sessions to cover their positions, at average daily volumes. 

On the charts, Rackspace Hosting, Inc. (NYSE:RAX) has been consolidating just above the $20 level ever since its breakout attempt was rejected by its 80-day moving average earlier this month. Moreover, even with today's 3.4% pop to put the shares at $21.28, RAX is down 16% in 2016 -- and notched a five-year low in mid-February.

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