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January 29, 2013  Tue 5:47 AM CT

LYB: SEE CHART GET CHAIN FIND STRATEGIES
Traders are betting on further gains in LyondellBasell Industries, which is just off all-time highs ahead of its earnings report at the end of this week.

More than 7,700 March 65 calls traded in a strong buying pattern yesterday for prices ranging from $0.65 to $1, according to optionMONSTER's Heat Seeker tracking system. The volume was more than 5.5 times higher than the strike's previous open interest of 1,365 contracts, clearly showing that these are new purchases.

LYB fell 2.41 percent yesterday to close at $61.24, a session after hitting a lifetime high of $62.97. The Dutch chemical and refining company bounced sharply at the $45 level in mid-November.

The long calls, which lock in the price where traders can buy the stock, are looking for LYB to climb above the $65 strike price by mid-March. The options could be sold earlier for a profit if their premiums rise with any rally, but these contracts will expire worthless if the shares don't move before then. (See our Education section)

Yesterday's trading pushed total option volume in the name past 20,500 contracts, more than 8 times its daily average of 2,463 in the last month. Calls outnumbered puts by 4 to 1.

The company is tentatively scheduled to deliver its fourth-quarter and full-year report on Friday before the market opens. It has also scheduled an investor day for March 13.
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As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

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