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Exelon Corporation Message Board

  • sapnetkram sapnetkram Feb 19, 2013 5:43 PM Flag

    Options looking cheap?

    Got back into EXC- in the form of out of the money calls- today after a long hiatus.

    The dividend cut is priced in.

    The fundamentals are mostly out. Exelon is a merchant power generator that is struggling- but surviving- in a low rates market.

    Meanwhile Obama is going to announce climate change regulation. That would be good news for nuclear and may shift momentum in the upward direction. Maybe not today, maybe not in three months, but probably in six months.

    EXC has been a boring stock for the past few months- stuck in a trading range between $28 and $31. That breeds complacency among market makers who normally look to historical volatility to price these options. I'm not going to say which strikes/expiries I like the most- I may be easing in a little bit more over the next few days, but in general, calls struck above $31 seem a bit cheap and could do well in a longer-term turnaround play. (Due to put-call parity puts would also be cheap, but delta hedge strategies are a little too complicated for the average investor, even a former options trader investing in his own account.)

    WARNING: most options expire worthless. It's wise to treat each options contract as at least 50 shares of EXC when buying.

    DISCLOSURE: Long out of the money calls.

    Sentiment: Buy

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EXC
31.78-0.45(-1.40%)Jul 22 4:01 PMEDT

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