The option pits for Rambus (RMBS, $8.01, up $0.02) have been active today as shares try to hold $8 and make another push at their 52-week high of $8.19. Traders are favoring the June 9 calls (RMBS130622C00009000, $0.10, down $0.01) as a "cheap way to play a run to $10.
If shares were to reach $10 by mid-June, the 25% gain in the stock could be worth a 900% return on the aforementioned call options as they would be worth at least $1. A move to $9.20 would double the June 9 calls.
The risk is that shares stay below $9 by June 22, and in this case, the options would expire worthless. A 10-contract trade would cost you $100 at current levels and we love the risk/ reward this trade has to offer.
Rambus has been a volatile stock in the past due to the legalities of protecting their patents but they have been reducing their losses and revenue has been picking up. The options expire in less than a month and we will update the trade as it progresses.