By Pete Najarian
NRG Energy (NRG) has been rallying for the last five weeks, and one big investor is looking for another jolt to the upside.
optionMONSTER's Heat Seeker tracking system detected the purchase of 20,000 June 25 calls at an average premium of $0.8875 and the sale of a matching number of June 27.50 calls for $0.425.
The call-spread strategy cost a net cost of about $0.46 and will generate a profit of about 440 percent if the stock closes at or above $27.50 on expiration.
NRG climbed 1.6 percent to $24.17 on Friday, bucking weakness in the broader market. The power-plant owner has climbed 19 percent since March 26, rebounding from a 10-month low as investors priced in better demand amid a stronger economic backdrop.
Berkshire Hathaway (BRK.A) owns 6 million shares, or about 2.2 percent, of the New Jersey-based company. It's also trading at the kind of valuations that would get Berkshire CEO Warren Buffett interested now: The price-to-book ratio is just 0.8 times and enterprise value is just four times EBITDA.
NRG pulled back after trading within a few cents of its 200-day moving average on Friday (purple line on chart), and the call-spread buyer is clearly looking for it to rally back to the levels where it peaked in the August-October period.
The shares could also get a charge heading into first quarter earnings, scheduled to be released before the market opens on May 10.
Overall options volume in NRG was 23 times greater than average in the session, with calls outnumbering puts by 114 to 1.
(Chart courtesy of tradeMONSTER)
Disclosure: I own a long call spread in NRG.