NRG Energy fell on a bad earnings report last month, but one big
investor apparently thinks that the bottom is in.
optionMONSTER's tracking systems detected the sale of 10,000 April
19 puts for $0.50. Volume was more than 370 times open interest in
NRG fell 0.82 percent to $19.36 yesterday and has lost 15 percent
of its value in the last year. The power-generation company badly
missed consensus estimates the last time it issued results on Feb.
22, though management said it would meet full-year EBITDA
The stock has been a weak performer, badly lagging the broader
market since the S&P 500 bottomed out two years ago.
Yesterday's put sale, however, reflects a belief that the shares
are done falling and will remain above $19 through expiration. If
that's true, the trader will get to keep the premium; if it's
wrong, he or she will be obligated to buy NRG at the strike price.
Selling puts is a common strategy when investors like a stock but
don't want to commit capital to buying it. Like owning shares, it
has downside risk. Unlike owning shares, it has limited upside but
doesn't require a rally to make money. (See our Education section)
The transaction pushed overall option volume in NRG to 9 times
greater than average.
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