One big investor thinks that NRG Energy is dead in the water after rallying and then pulling back.
optionMONSTER's monitoring systems detected the sale of 1,500 March 18 puts for $0.75 and 1,500 March 22 calls for $0.65. Volume exceeded open interest at both strikes, so new positions were initiated.
Known as a short strangle, the trade resulted in a credit of $1.40. The investor will keep that amount as profit if the power-generating stock remains between $18 and $22 through expiration. Gains will erode outside of that range, turning to losses below $16.60 and over $23.40. (See our Education Section .)
NRG rose 0.86 percent to $19.98 on Wednesday. It surged more than 50 percent between June and mid-October, but then surrendered almost half those gains.
The strangle seller may have been eyeing key chart levels when crafting his or her strategy because NRG previously faced resistance around $18 and $22. That could make them expect the stock to remain between those two levels and favor their trade.
Overall option volume was twice the daily average in the name.
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