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How one trader is playing GNC upside

Chris McKhann (chris.mckhann@optionmonster.com)

One trader is looking for further, though limited, gains in nutritional retailer GNC as it tries to stay near all-time highs.

More than 10,000 GNC options traded on Friday, compared to a daily average of 1,263 contracts in the last month. Virtually all of the action was in one call spread .

optionMONSTER tracking systems show that a trader bought 3,000 May 42.50 calls for $2.10 and sold 6,000 May 45 calls for the bid price of $1. This is clearly new activity, as the open interest at each strike was roughly 800 contracts before the session began.

This ratio spread costs the trader just $0.10, which is the risk if shares remain below $42.50. The maximum gain would be realized if GNC climbs to $45 before the options expire in mid-May. Above that level, the trader would effectively be short the stock. (See our Education section)

GNC was down fractionally on Friday to close at $41.75 after reaching a lifetime peak of $43.94 a week earlier. Shares were below $31 on the first trading day of 2013.

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