Bulls looking to get a jolt out of NRG
David Russell | [email protected]
optionMONSTER's Heat Seeker monitoring program detected a surge of upside activity in the name today, with two large trades in particular standing out. The first appeared shortly after the open as some 6,000 July 29 calls were bought for $0.20 and a similar number of July 27 puts were sold for $0.15.
The investor paid just $0.05 to enter the position, which is very similar to owning shares. It will track moves to the upside or downside through the end of next week. He or she has also agreed to buy the stock for $27 if they close below that level, suggesting that little downside risk is seen for the near term.
NRG is trading at $28.33 this afternoon, up 1.72 percent on the day and 23 percent in the last year. The shares have been pushing against long-term resistance around $28 that dates back to 2009. Some chart watchers may expect a dramatic move if that price range is broken.
The Heat Seeker showed 5,000 September 28 calls purchased for $1.55 later in the morning. A block of 5,000 September 27 calls was also sold for $2.15, but volume was below open interest. That suggests the investor closed a winning position and rolled to the higher strike.
The trader collected a credit of $0.60 and remains exposed to further upside in the share price. (See our Education section for more on how to manage positions with options.)
NRG raised its long-term free cash-flow guidance on June 24, saying it was receiving more cost savings than expected from its acquisition of former rival GenOn. The company hasn't yet announced the date of its next quarterly release, but last year's calendar suggests it will occur in early August.
Calls account for a bullish three-quarters of the volume so far today. Total option activity is 7 times greater than average, according to the Heat Seeker.