Option Bulls Cheer On NRG Energy Inc (NRG) After Earnings

NRG Energy Inc (NRG) is making big strides after earnings, as option bulls cheer the stock on

Nov 4, 2016 at 1:21 PM
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Power company NRG Energy Inc (NYSE:NRG) is enjoying a post-earnings boost today. The company issued well-received earnings and optimistic fiscal-2017 guidance, and hiked its quarterly dividend by a penny, to 25 cents a share. In addition, NRG announced that Chad Plotkin would be taking over the role of Senior Vice President and Chief Financial Officer of NRG Yield. Meanwhile, recent option players are likely cheering for continued upside for NRG.

NRG is trading up 13.4% at $11.48 so far today -- on pace for its best day since November 2008. The stock is now set to eclipse its 10-week moving average, which has served as resistance for the shares since July. However, NRG is still down 2.7% so far this year, and has dropped over 37% since touching an annual high of $18.32 in early June.

NRG 1104

Despite its technical weaknesses, in the option pits, calls have been dominant. NRG's 10-day call/put volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows nearly nine calls bought to open for every put over the last two weeks, though this is actually a lower rate than usual, and volume is light on an absolute basis, with just 1,757 calls and 203 puts crossing the line. Today, NRG calls are trading at twice the average intraday pace, and the front-month November 11 call is NRG's most active option, which saw significant buy-to-open action yesterday.

Drilling down, peak front-month open interest lies at the overhead November 13 call. Elsewhere, the 12-strike call sits at the top of the December-dated series, with a massive 28,232 contracts outstanding -- the second-most among all strikes. However, the heavy concentration of call open interest sitting above NRG's current perch could potentially translate into an added layer of resistance in the short term.

Analysts also remain optimistic toward NRG. Currently, six of eight brokerage firms rate the shares a "buy" or better, with only a single "sell" on the books. What's more, NRG Energy Inc (NYSE:NRG) currently has an average price target of $16.71, a 45% premium to NRG's current price. 

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