Bulls Flip Switch in Con Edison

By Mike Yamamoto of OptionMonster

NEW YORK -- Option traders are looking for Consolidated Edison  (ED) to heat up this summer.

More than 20,000 August 60 calls traded in a strong buying pattern Wednesday, with almost all of them going for 15 cents to 30 cents, according to OptionMonster's tracking systems. Open interest in the strike was just 1,309 contracts before the trades hit, indicating that new positions were established.

These long calls lock in the price where the stock can be purchased through mid-August no matter how far it might climb. They could be sold earlier at a profit if premiums rise with a rally before then, providing potentially significant leverage, but the contracts will expire worthless if shares remain below $60.

Con Edison gained 1.73% on Wednesday to close at $56.48, just off its session high. The New York utility company fell sharply after reporting quarterly results in early May but found support at the $54 level and has been trying to rebound since. It also has a dividend yield of about 4.5%.

Total option volume topped 28,000 Wednesday, more than 40 times its daily average for the last month. Overall calls outnumbered puts by 42 to 1, a reflection of the session's bullish sentiment.

Yamamoto has no positions in ED.

 

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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