GENZ – Genzyme Corp. – Shares of the world’s largest maker of drugs for rare genetic diseases are down slightly by 0.35% to arrive at $67.16 as of 11:55 am (ET) after earlier rallying 1.25% to briefly touch a new 52-week high of $68.23. This marks a 27.7% increase in its share price since the end of last week, a rally fueled by mounting speculation the firm might be taken over by a larger company, namely, Sanofi-Aventis. One cautious options strategist initiated a three-legged spread in order to build-up downside protection through January 2011 expiration just in case shares surrender recent gains. It looks like the trader sold out-of-the-money call options to partially offset the cost of buying a debit put spread. The investor sold 7,000 calls at the October $75 strike for a premium of $1.60 each, purchased 7,000 puts at the January 2011 $65 strike for a premium of $4.80 apiece, and sold 7,000 puts at the lower January 2011 $50 strike for a premium of $1.10 a-pop. The net cost of the transaction amounts to $2.10 per contract. The trader responsible for the spread may be hedging a large underlying stock position. In this scenario, the investor is willing to have the shares called from him at October expiration should the price of the underlying stock exceed $75.00. Genzyme’s shares could top $75.00 if the biotechnology firm is ultimately purchased by another company for more than that amount in the next several months. But, the value of the underlying position is partly protected through expiration in January 2011 if it’s the case that no takeover occurs and shares either stagnate or head south. Downside protection kicks in should Genzyme’s shares fall 6.3% from the current price of $67.16 to breach the effective breakeven point on the put spread at $62.90 ahead of expiration day in January.