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Volatility bull targets Con Ed

Premiums on Consolidated Edison are starting to climb after a long decline, and one investor is looking for them to keep rising.

optionMONSTER's tracking systems detected the purchase of about 2,500 May 49 calls for $1.45 and an equal number of May 49 puts for $1.20 to $1.25. Volume was more than 6 times open interest in both strikes.

The trade, known as a straddle, cost $2.60 to $2.65 to implement. It will make money if the shares close above $51.60 or drop below $46.40 by expiration.

ED rose 0.45 percent to $49.51 on Friday and has been grinding slowly upward since September.

The straddle can also profit from higher implied volatility, one of the key elements in pricing options. Last month it bottomed out at 12 percent, the lowest reading in more than three years, and is now up to about 15 percent.

The transaction follows an increase in the Volatility Index, commonly known as the VIX, which measures the cost of protection on the S&P 500. ED is a member of the index.

Overall options volume in the company was 7 times greater than average in the session.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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