By David Russell
NRG Energy (NRG) fell on a bad earnings report last month, but one big investor apparently thinks that the bottom is in.
Our tracking systems detected the sale of 10,000 April 19 puts for $0.50. Volume was more than 370 times open interest in the strike.
NRG fell 0.82 percent to $19.36 yesterday and has lost 15 percent of its value in the last year. The power-generation company badly missed consensus estimates the last time it issued results on Feb. 22, though management said it would meet full-year EBITDA estimates.
The stock has been a weak performer, badly lagging the broader market since the S&P 500 bottomed out two years ago.
Yesterday's put sale, however, reflects a belief that the shares are done falling and will remain above $19 through expiration. If that's true, the trader will get to keep the premium; if it's wrong, he or she will be obligated to buy NRG at the strike price.
Selling puts is a common strategy when investors like a stock but don't want to commit capital to buying it. Like owning shares, it has downside risk. Unlike owning shares, it has limited upside but doesn't require a rally to make money.
The transaction pushed overall option volume in NRG to nine times greater than average.