NRG Energy Options (NRG): Unusual Trading Activity

| June 26, 2012 | 0 Comments

NRG OptionsOptions in mega power producer NRG Energy (NRG) showed huge option activity yesterday afternoon.

In fact, call options outnumbered put options in this name by nearly 20 to 1.

While the company has been beaten down with other coal and energy names, there’s at least one option trader that’s drawing a line in the sand.

NRG Energy was poised to finish the trading session down about 1.2% at $14.53 when it happened…

In a single print, one option trader came in and slapped down $116,000 on 2,000 contracts of the NRG August $15 strike call options.

Over the last few trading days, option traders have been slowly nibbling at this option strike.  But this trader clearly stepped in big yesterday.

Don’t forget, straight call buying without any other options is a strategy that’s used when traders believe a stock is going to see a significant rise in value.

And he’s not alone…

It looks like more investors are getting bullish on the Energy sector by the day. 

If you don’t already know, NRG is an independent power producer.  The company has more than 25.5 gigawatts of generation in three countries, with most of it in the US.  It’s also one of the largest retail energy providers in the US with more than 2 million customers.

NRG’s renewable assets in the US are primarily concentrated in the Northeast, Texas, and California.  In 2006, they purchased 10,900-megawatt power generator Texas Genco for $8.3 billion.

But, we can’t look at a company like NRG without looking at everything else it has going for it.

For one, ultra-low-cost coal and nuclear power plants produce two thirds of NRG’s generation.  And the company has expanded its coal-fired margins by retrofitting these plants to burn Powder River Basin coal.   

This increases their margins exponentially!

In addition, NRG owns highly valuable wholesale generation assets.  These include 1,400 megawatts of in-city generation in New York City as well as low-cost coal and nuclear plants in power-hungry Texas. 

Important assets to be sure… as they bring in a good portion of NRG Energy’s yearly revenue.

Lastly, regardless of natural gas price levels, NRG will benefit from any uptick in economic activity and power use.

With the Energy sector having been beaten down so badly, I think a turnaround is coming in the very near future.  And it looks like this option trader agrees.

And as we’ve heard many times before, option traders usually have their fingers firmly on the pulse of the market.  Now could be the perfect time to jump in.

For more detailed information on unusual options activity and how you can profit from it, be sure to sign-up for our daily newsletter, Options Trading Research.  It’s always 100% free and packed full of option trading ideas you can use immediately in your own portfolio. Click here to subscribe for free.

Safe Trading,

Marcus Haber

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Category: Unusual Options Trading Activity

About the Author ()

Marcus Haber is the co-editor of Options Trading Research and boasts well over a decade of real-life options experience. Learning from some of the biggest names in the business, Marcus has served as an Options Strategist for a number of firms and was also appointed to the Options Advsiory Board with Pershing, a branch of the Bank of New York.