Trader thinks NRG has lost its energy

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One big investor thinks that NRG Energy is dead in the water after rallying and then pulling back.

optionMONSTER's monitoring systems detected the sale of 1,500 March 18 puts for $0.75 and 1,500 March 22 calls for $0.65. Volume exceeded open interest at both strikes, so new positions were initiated.

Known as a short strangle, the trade resulted in a credit of $1.40. The investor will keep that amount as profit if the power-generating stock remains between $18 and $22 through expiration. Gains will erode outside of that range, turning to losses below $16.60 and over $23.40. (See our Education Section .)

NRG rose 0.86 percent to $19.98 on Wednesday. It surged more than 50 percent between June and mid-October, but then surrendered almost half those gains.

The strangle seller may have been eyeing key chart levels when crafting his or her strategy because NRG previously faced resistance around $18 and $22. That could make them expect the stock to remain between those two levels and favor their trade.

Overall option volume was twice the daily average in the name.



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.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


This article appears in: Investing , Options

Referenced Stocks: NRG

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