Options Trading News

December 27, 2012  Thu 1:47 AM CT

W.R. Grace has been going straight up for years, but one trader is bracing for a pullback.

optionMONSTER's Depth Charge tracking program detected the purchase of 4,500 March 65 puts for an average premium of $2.28. The transaction came less than one minute after an equal number of March 60 puts were sold for $1.05 in volume under previous open interest.

This suggests that the investor had previously owned the 60s, which were closed and rolled to the higher strike. The move cost him or her $1.23 and provides an additional $5 of downside protection. (See our Education section)

GRA slipped 0.15 percent to $67.99 yesterday but is up 48 percent so far this year. The chemical company's earnings have repeatedly beaten analyst estimates amid strong demand from Latin America and as management raises prices. It's spent most of December hovering in its current range near all-time highs, which could make some traders think that it's at risk of a reversal.

Total option volume was 13 times greater than average in the session, according to the Depth Charge. Puts accounted for more than 80 percent of the total.
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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