$NRG option bulls quadruple money

NRG Energy (NRG) shares have been trading higher since their early-June lows and patient option bulls are reaping profits today.

On Jun. 18, Market Rebellion’s Unusual Activity programs detected the the purchase 13,150 September $42 calls for $0.75 to $0.95 with shares at $36.91. Open interest in the contract before the trade occurred was just 653, showing that this was a new position.

Those calls traded for as much as $4.00 this afternoon, at least 4 times their purchase prices. The stock rose 23.71% in the same time period, illustrating the kind of leverage that can be achieved with options.

Long calls lock in the price where a stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

NRG traded to a new multi-year high of $45.73 earlier in the session and closed up by 3.75% at $45.60.