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Why puts are surging in Rock-Tenn

Chris McKhann (chris.mckhann@optionmonster.com)

Rock-Tenn is not far off its 52-week highs, but a bearish strategy makes up all the option activity in the consumer-packaging company so far today.

optionMONSTER systems show that a trader bought 2,000 February 70 puts for the ask price of $1.25 and sold the same number of February 80 calls for the bid price of $0.30. The volume was significantly higher than the previous open interest at each strike, and both had wide bid/ask spreads--indications of strong degrees in sentiment behind the positions.

The combination trade cost a net $0.95 to open, plus the margin requirements. This could be an outright bearish play but, given the structure, it appears to be a protective collar on an existing long stock position. (See our Education section)

RKT is up 1.43 percent to $74.64 in afternoon trading. The stock ended Tuesday's session at $75.06, its best close since Oct. 17.  

The total volume of 4,000 options compares with Rock-Tenn's daily average of just 200 contracts in the last month.

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