Options Traders Brace for Decline in NRG

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David Russell, reporter for OptionMonster.

Options traders are positioning for a pullback in NRG Energy(NRG Quote) as the utility stock struggles to break a technical resistance level on its chart.

Volume in the September 20 puts surged to 5,417 against open interest of 1,887 contracts, according to OptionMonster's monitoring systems. A handful of large purchases this morning for $2.15 accounted for all the activity.

NRG, which is up 3.6% to $21.40, and would have to decline at least 14% for these downside puts to generate a profit. The options action occurred at the same time volume spiked in the shares, which may reflect protective put buying. The trades also occurred after NRG was scheduled to have made a presentation at the Deutsche Bank Energy & Utilities conference.

NRG has been unable to break through the $21 trading support level in December and January. Some traders may now be considering that price as a near-term top for the shares.

Puts in NRG outnumbered calls by 4 to 1 today. Of the calls that did change hands, most of the large trades were sales, which suggests investors wrote the calls to lock in profits and guard against a decline in the shares.