Mike Khouw Sees Unusual Options Activity In Rackspace Hosting

On CNBC's Options Action, Mike Khouw spoke about increased options trading volume in Rackspace Hosting, Inc. RAX on Tuesday. Put options volume was nine times higher than the average daily put options volume.

Khouw noticed that somebody bought 3,500 contracts of the October 2, 31 strike puts for $1.35. The breakeven for the trade is at $29.65 or approximately 4.5 percent lower from the current price of the stock. The trader paid $472,500 for the premium and that is the maximal amount that can be lost on this trade.