Volatility seller targets Genon Energy

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Genon Energy's option premiums are through the roof, and one investor is taking the other side of the trade.

Our tracking systems detected the sale of 5,000 November 2 calls for $0.25. Volume was more than twice existing open interest in the strike.

He or she probably owns shares in the electricity-generation company, which has lost more than half its value in the last year. Selling calls allow the trader to earn income against the long position and locks in an exit price of $2.25.

It also permits the trader to capture the extra premium resulting from GEN's 97 percent implied volatility . That's almost triple the stock's historical tendency to move. (See our Education section)

GEN fell 1.18 percent to $1.68 yesterday and is back to levels it last saw in late 2002. The call sale pushed total option volume in the name to 19 times greater than average.



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: GEN

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