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Quick profits turned in FirstEnergy

By: optionMONSTER
Posted: 11/11/2013 6:16:00 AM
Referenced Stocks: FE

FirstEnergy is a slow-moving utility, but it handed traders some fast money on Friday.

Shortly after the opening bell, optionMONSTER's Heat Seeker system detected heavy buying in the November 38 calls and the November 39 calls. The paper hit with the stock holding multi-year lows and followed similar bullish activity in recent weeks.

FE then started grinding higher, and the calls began doing their work. The stock was up 1.36 percent to $38.84 by the end of the session, but the options had almost doubled in value.

The November 38s, which initially priced for $0.35 to $0.55, traded for as much as $1.10. And the November 39s climbed to $0.45 from their early range between $0.20 and $0.25. Some 5,800 contracts traded in the 38s, while the 39s saw volume close to 5,000.

Long calls lock in the price where a stock can be purchased. Given how cheap they are, even a small move in the underlying share price can result in significant leverage in the options--which is exactly what happened on Friday in FirstEnergy. (See our Education section)

Overall turnover in the FE was 10 times greater than average in the session. Calls accounted for a highly bullish 98 percent of that total.

(A version of this post appeared on InsideOptions Pro on Friday.)