NRG Energy has been ripping higher for months, resulting in the second increase of tenfold or higher for bullish option positions in as many months.
On July 11, Investitute’s tracking systems detected the purchase of 10,000 September $18 calls for $0.55 with shares at $16.46. This was clearly fresh buying, as open interest in the strike was only 2,917 contracts before that session began.
Today those calls traded up to $7.72, representing a profit of more than 1,300 percent. The stock surged 34.9 percent in the same time period, a huge move but still far below that of the options on a relative basis. This follows a gain of 1,400 percent in July $17 calls posted last month on Investitute, and co-founder Jon Najarian cited another large call purchase on CNBC’s “Halftime Report” this afternoon.
Long calls lock in the price where the 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 slipped 0.97 percent today to close at $25.61 but has more than doubled since last December. The wholesale power company has been rallying since mid-July after announcing a turnaround strategy with the help of activist investment firm Elliott Management.