Unusual Options Activity: Rapid7 (RPD)

Cybersecurity company Rapid7 (RPD) has had a 30 percent drop over the past year. One trader sees a strong rebound in the coming weeks.

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  • That’s based on the July $60 calls. With 40 days until expiration, 10,579 contracts traded compared to a prior open interest of 111, for a 95-fold rise in volume on the trade. The buyer of the calls paid $0.95 to make the bullish bet.

    Shares recently traded just over $47, so they would need to rise $13, or about 28 percent, for the option to move in-the-money. The strike price is still well under Rapid7’s 52-week high of $74.88.

    Rapid7 has been trending higher in recent weeks, but there’s little to suggest an immediate jump to $60. And the company doesn’t report earnings again until August, after the July options expire.

    However, the cybersecurity company grew revenues by 16 percent last year. And other players are starting to embrace the use of artificial intelligence (AI). Those trends could push shares higher in the coming weeks.

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  • Action to take: With the stock in an uptrend, investors may like shares here. But as an early-stage company, there’s no dividend for investors now.

    For traders, the July calls are inexpensive, and could see mid-double-digit returns in the coming weeks on a further move higher in shares. Traders should use any bullish news as a sign to take a quick profit on the trade.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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