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Bulls Expect a Rally From GrafTech

GrafTech International doesn’t usually trade a lot of options, but yesterday it drew unusually heavy bullish activity.

A trader snapped up a block of 3,000 November 10 calls for $0.35 and $0.40, according to OptionMonster’s real-time tracking systems. There was no previous open interest in the strike, clearly indicating that this is a new position. About 300 more contracts were purchased in subsequent transactions.

Those calls lock in the purchase price of shares in the company, whose graphite products are used in an array of industrial applications. The options can generate some nice leverage in the event of a rally, allowing the trader to profit for much less cost than buying the stock directly. But if its shares don’t climb, those calls will expire worthless.

GrafTech shares fell 0.32 percent to $9.29 yesterday and has been drifting lower since early 2011, when the stock double-topped around $23. It’s been attempting to rebound since the summer, especially after earnings and revenue beat expectations in July.

While the date of the next quarterly report hasn’t been announced, last year’s calendar indicates that results will probably be released in late October. Yesterday’s call buyer probably expects the stock to climb into that news on hopes of another strong report.

GrafTech trades an average of only 71 total options per session, but yesterday’s activity was 59 times that amount. Calls accounted for 99 percent of the volume.

—By CNBC Contributor David Russell

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David Russell is a reporter and writer for OptionMonster. Russell has no positions in GTI.

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