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Investor is bulking up calls in GNC

David Russell (david.russell@optionmonster.com)

One investor is raising the bar in high flyer GNC Holdings as earnings approach.

optionMONSTER's tracking programs detected the purchase of 1,500 August 47.50 calls for $2.31 and the sale of a matching number of August 52.50 calls for $0.57. Volume was below open interest in the 47.50s, which suggests an existing short position was closed and rolled to the higher strike.

The trader probably owns shares in GNC and sold the contracts as part of a covered-call strategy . Now that the stock has rallied, the investor is buying them back and adjusting the position to raise the exit price. The adjustment cost $1.74 and can earn an additional $5 if the underlying climbs to $52.50 by expiration. (See our Education section for more on how to manage risks by selling calls.)

GNC is down 1.17 percent to $47.20 in midday trading but up 42 percent so far this year. The vitamin and supplement retailer, which went public for $16 in March 2011, is near an all-time high from June.

Management hasn't yet announced when second-quarter earnings will be released, but last year it occurred on July 26. If it follows that schedule this year, today's call roll will increase upside potential in the event of a strong report.

Total option volume in the name is already well above its full-session average today. Only 31 puts have traded so far.

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