Wednesday, January 17, 2007

Rack Up RACK?

Caltrader talks about a straddle play example on RACK which you'll find enlightening for uncertainty plays. The stock just got "racked" or should I say "whacked" today down $12.44 (-38%).

With earnings coming up and IV potentially jumping higher into the earnings report not to mention some serious put buying and call selling growing it might be time to review a straddle play or even a value call play.

My inclination might be toward playing a directional value call play. J. Kahn at In The Money, mentions that the last time RACK got whacked it bounced back considerably. Check out the chart below and he's right. It looks like it took about 3 months to double from its 52 wk low after the beating in mid august. Will history repeat?

I'll investigate and get back to you.

No comments: