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
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.