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• Bulls want to get a jolt from Dynegy
• Largest option buying in equities so far
• Update: Top unusual option activity

• DYN 100% Rate It

A trader wants to harvest premium in Dynegy, which is getting acquired by Blackstone Group.

optionMONSTER's tracking systems detected the sale of 10,000 December 5 calls for $0.15 and 10,000 December puts for $0.65, resulting in a credit of $0.80. The trade comes amid heavy option activity in the power producer, with volume running 10 times greater than average.

DYN is up 1.55 percent to $4.60 in early afternoon trading. On Thursday it touched an eight-year low of $2.76, only to explode higher by 63 percent the next day when the purchase was announced.

BX agreed to pay $4.50 a share for the company, which is still laden with debt from the days of Enron and energy trading in the late 1990s.

Today's option strategy, known as a short straddle, is designed to earn income from the passage of time. If the takeover closes at the agreed-upon price later this year, the puts will be worth $0.50 and the calls will erode to zero, resulting in a net profit of $0.30. They'll lose money if it falls below $4.20 or climbs above $5.80.

The straddle is an example of how investors can use options to make money even when a stock is dead in the water. (See our Education section)

Disclosures: I own Blackstone shares.

(Chart courtesy of tradeMONSTER)

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