Moderate bullishness crosses NRG (NYSE: NRG) tape

By
A A A

NRG Energy Inc. (NYSE: NRG ) earnings figures are due in one week, and at least one option investor boosted upside call volume by trading a spread.

NRG is currently trading up 2% to $24.25 without any company-specific news. The stock reached a 52-week high of $29.96 in October, and options action during today's session suggests at least one investor expects the stock to climb back up near those levels throughout the near-term.

At 12:30 p.m. EST, a block of 10,000 June 25-27.5 bull call spreads changed hands for a net debit of roughly 67 cents per spread. Earlier in the day around 11 a.m. EST, we saw two blocks totaling 5,000 June 25-27.5 bull call spreads cross the tape for around the same premium. More than 20,000 of these spreads changed hands thanks to some investors who anticipate roughly 12% of upside prior to June options expiration in approximately 50 days. If NRG shares climb higher than $27.50 during the next two months, this spread trade could produce a maximum profit of $1.83 per spread (the difference between the strikes minus the premium paid). On the other hand, if the stock does not climb higher than the breakeven price of $25.67, which represents a 5% climb from the stock's current level, this bull call spread caps any losses at the premium paid (67 cents per spread).

You can build a visual of the risk/reward dynamics of this bull call spread by opening a free virtual trading account . These types of tools provide in-depth analysis of the breakeven and profit and loss levels for this and other stock and option trades.

Implied volatility of the NRG June 25 calls is 33% and the June 27.5 calls haven an implied volatility of 32%, compared to the stock's 30-day historical volatility of 27%. This call action could be an investor rolling down to a lower strike, but I think it is more likely that investors bought these spreads to open moderately bullish positions on NRG.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Options

Referenced Stocks: NRG

Jud Pyle

Jud Pyle

More from Jud Pyle:

Related Videos

Stocks

Referenced

100%

Most Active by Volume

61,354,178
  • $10.59 ▲ 13.26%
57,732,182
  • $16.27 ▲ 1.12%
51,991,548
  • $103.30 ▲ 0.78%
48,129,834
  • $20.65 ▲ 5.52%
41,623,916
  • $12.63 ▲ 8.13%
34,295,241
  • $76.68 ▲ 2.49%
31,519,079
  • $34.57 ▼ 1.00%
28,847,879
  • $3.64 ▲ 0.28%
As of 9/2/2014, 04:15 PM

Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com