Caution reigns before Grace earnings

David Russell (david.russell@optionmonster.com)


Traders are cautious before W.R. Grace reports earnings this week.

optionMONSTER's Depth Charge monitoring system detected the purchase of 6,600 August 80 puts for $1.10 to $1.60. Volume almost 200 times the previous open interest at the strike, indicating that new positions were initiated.

Puts lock in the price where shares can be sold in the chemical company, letting investors hedge long positions or speculate on a drop. These options can generate significant leverage, in this case roughly doubling from a 9 percent decline in the stock price. (See our Education section)

GRA fell 0.75 percent to $84.49 on Friday but is up 66 percent in the last year, more than twice the performance of the S&P 500 in that period. The chemical and materials stock has ridden a wave of solid quarterly results for more than a year, with the next set of numbers scheduled for release before the opening bell this Thursday.

Overall option volume was 14 times greater than average in the session, according to the Depth Charge. Puts accounted for a bearish three-quarters of the total.

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