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How the bulls are playing W.R. Grace

David Russell (david.russell@optionmonster.com)

Someone thinks W.R. Grace still has room to run.

optionMONSTER's tracking systems detected the purchase of 4,460 September 72.50 calls in the chemical producer for $5.70. Equal-sized blocks were sold in the September 65 puts for $2.80 and the September 82.50 calls for $1.90 seconds later. There was barely an open interest at any of the three strikes before the trade appeared, indicating these are new positions.

The investor paid $1 to open the trade and will earn a maximum profit of 900 percent if GRA closes at or above $82.50 on expiration. It also creates the potential for losses to the downside because of the puts sold short . (See our Education section)

GRA is down 0.75 percent to $72.08 in afternoon trading. The stock is up 31 percent in the last year, fueled by a steady stream of positive earnings reports.

Strategies like today's illustrate the myriad ways that options can be combined to express an investment thesis. In this case, the trader may have missed the earlier rally now wants an inexpensive way to profit from a continued rally. It also obligates the investor to buy the stock on a pullback to $65, which he or she might be willing to do anyway .

Almost 14,000 contracts have traded in GRA so far today. That's more than quadruple the volume in a typical session.

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