NRG calls explode 1,400% in 3 days

Bullish option positions that were opened in NRG Energy earlier this week are already seeing stratospheric returns.

On Monday, Investitute’s tracking systems detected the purchase of 6,800 July $17 calls for $0.25 and $0.30 with shares at $16.25. This was clearly fresh buying, as open interest in the strike was only 1,955 contracts before the activity appeared.

Those calls ended today trading at $4.20, a gain of more than 1,400 percent on average. The stock surged 29.9 percent in the same time frame, a large move but one that was still well below that of the options. Investitute co-founder Pete Najarian reported the unusual buying on CNBC’s “Halftime Report” on Monday.

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 surged 29.39 percent today to close at $21.09, just after reaching a 52-week high of $21.14. The wholesale power company spiked higher after announcing a turnaround strategy with the help of activist investment firm Elliott Management.