Unusual Options Activity: NRG Energy (NRG)

Shares of utility company NRG Energy (NRG) have been in a sharp drop since early March. One trader sees the potential for a partial rebound in the coming weeks.

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  • That’s based on the July $35 calls. Over 6,900 of the contracts traded against a prior open interest of 218, for a 32-fold rise in volume on the trade. The buyer of the calls paid $0.85.

    Shares of the company have recently pulled back to six-month lows, and the price is down nearly 11 percent over the past year as a result. Besides being at six month lows, shares have recently started throwing off oversold technical indicators, and a bounce back to the $35 range would be at the stock’s 200-day moving average.

    Action to take: The oversold technical indicators suggest a short-term bounce is likely. That bodes well for this short-term trade with a strike price at a technical level that shares could easily bounce back to.

    While the trade is a short-term one that has a potential to go to zero if shares fail to bounce, if they do move higher, this trade could lead to triple-digit returns.

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  • Investors may also like shares of the utility beyond a short-term trade. The company recently increased its annual dividend, and at today’s prices shares yield just over 4 percent, a decent level for a utility company.

     

    Disclosure: The author of this article has no position in the stock mentioned here, and does not intend to trade this company after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.