Options Traders Evaluate United Rental Risk

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Chris McKhann , analyst at OptionMonster.

GREENWICH, Conn. (TheStreet) -- Shares of United Rentals(URI Quote) are holding above $8 as traders reposition their risk.

United is down 1.7% to $8.09 after topping out on Friday at $8.43, the highest level for the stock since January 8. Shares were as low as $2.52 on March 6 and have had a nice run since then.

Our systems pinpointed significant action in the September calls, with a spread trade involving the 7.5 and 10 calls. We see 7,000 of the 10 calls purchased in one block for 35 cents. This was against open interest of 4,392, so it clearly involves opening new positions. Seconds later, one block of 4,229 of the 7.5 calls were sold for $1.10. This action is against open interest of 5,972 contracts.

Because of this, it is likely that this trader is selling to close long calls that were held at the 7.5 strike, and buying the 10 calls. In doing so, they lock in a nice profit, lower their risk and get more bang for their buck in the event of further increases.

-- Reported by Chris McKhann of OptionMonster in New York.