FirstEnergy has failed to rally since the market bottomed two years ago, but the option activity on Friday was bullish.
optionMONSTER's tracking systems detected the sale of more than 2,400 July 33 puts, most of which priced for $0.45 to $0.47. More than 1,200 July 37 calls were purchased at about the same time, mostly for $1.45. Volume was more than eight times open interest in both strikes.
The company has been struggling along with other power producers such as NRG Energy but managed to hold its ground above $33. The option trader apparently believes that it will remain above that level and used income from selling the puts to buy calls.
The net cost of the trade was about $0.50 to $0.60 and will make money if FE rallies in the near term from its Friday close of $37.01, which was down 0.27 percent from the previous session.
FirstEnergy's last earnings report on Feb. 16 missed estimates, but we have seen sporadic bullish activity in the sector as investors attempt to call a bottom and bet that an economic recovery will drive electricity consumption.
The trades pushed total option volume in FE to about eight times the daily average.
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