By Jud Pyle, CFA, chief investment strategist for the Options News Network
A bullish investor lit up call activity in Atlanta-based electricity seller
today, a few weeks before the company is scheduled to announce second-quarter earnings figures.
The investor sold to close 10,000 July 15 calls for 35 cents and simultaneously bought to open 10,000 Sept. 12.5 calls for $3.05 with the stock trading at $15.07 a share. The July 15 calls are currently trading up 20 cents on the day and are home to current open interest of 11,000 contracts. The Sept. 12.5 calls, which have gained 38 cents so far today, are home to current open interest of just 721 contracts.
This strategy is considered a rollout; the investor isn't yet finished with Mirant and is moving his or her soon-to-expire July contracts out to a later-dated series.
Normal daily volume in Mirant rarely exceeds 10,000 contracts, but we saw at least one investor's trade double volume across all strikes today. In addition, July 15 and Sept. 12.5 are the only two strikes that have seen significant volume today; the remainder of the strikes have seen little (or no) volume.
Mirant stock has rallied more than 60% since reaching a 52-week low of $9.25 on March 6, but these shares are off approximately 14% from a recent high of $17.36. The investor needs Mirant stock to expire higher than $15.55 on September expiration. Mirant shares are currently trading up 54 cents so far today to $15.40.
Mirant has not announced any news for a couple weeks, but it looks like at least one investor is expecting a slight jump in the stock surrounding the company's earnings report on Aug. 7. Rolling options activity does not mean investors should stock up on Mirant shares, but we could see even more bullish options activity if Mirant earnings figures beat analysts' estimates again -- the company reported 79 cents earnings per share compared to analysts' estimates of 57 cents when Mirant last reported in March.
Meet Jud Pyle live in Las Vegas at the Forex & Options Expo.
Jud Pyle is the chief investment strategist for Options News Network and the portfolio manager of TheStreet.com Options Alerts. Click here for a free trial for Options Alerts. Mr. Pyle writes regularly about options investing for TheStreet.com.
Jud Pyle, CFA, is the chief investment strategist for Options News Network. Pyle started his career in finance in 1994 as a derivative analyst with SBC Warburg. After four years with Warburg, Pyle joined PEAK6 Investments, L.P., in 1998 as an equity options trader and as chief risk officer. A native of Minneapolis, Pyle received his bachelor's degree in economics and history from Colgate University in 1994. As a trader, Pyle traded on average over 5,000 contracts per day, and over 1.2 million contracts per year. He also built the stock group for all PEAK6 Investments, L.P. hedging, which currently trades on average over 5 million shares per day, and over 1 billion shares per year. Further, from 2004-06, he managed the trading and risk management for PEAK6 Investments L.P.'s lead market-maker operation on the former PCX exchange, which traded more than 10,000 contracts per day. Pyle is the "Mad About Options" resident expert. He is also a regular contributor to "Options Physics."