NRG Energy has been slowly grinding higher, and one investor
thinks that gains may accelerate in the next year.
optionMONSTER's Heat Seeker monitoring program detected the
of 11,506 January 2015 30 calls for $2.30 and the
of an equal number of January 2015 25 puts for $2.04. Volume
surpassed the previous open interest in each strike, indicating
that new positions were initiated.
The investor is now entitled to buy shares in the power generator
for $30 in the next 12 months no matter how high they might rise in
that period. But the trader is also on the hook to buy them for $25
if they go under that level--even if they drop to zero.
This position is similar to owning stock because it makes money to
the upside and loses to the downside but cost much less to
implement. In this case, the investor paid just $0.26 and will at
least triple his or her money every $1 the shares climb. (See our
section for more on the potential leverage of options.)
NRG rose 0.18 percent to $28.08 yesterday. The power company
rallied sharply between mid-2012 and mid-2013 but has been grinding
in a range since. The shares have made higher lows along their
200-day moving average since then, which suggests that bullish
momentum remains intact.
Given that shares might consolidate for several months longer,
yesterday's combination trade provides plenty of time and ensures
that the investor won't miss an eventual rally.
Total option volume in NRG yesterday was more than double its daily
average for the last month.
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