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Option Bulls Look for a Jolt From Exelon

Tuesday, 15 May 2012 | 6:51 AM ET


Electricity pylon pass the Ffos-Y-Fran opencast coal mine in Merthyr Tydfil, Wales.
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Electricity pylon pass the Ffos-Y-Fran opencast coal mine in Merthyr Tydfil, Wales.

Exelon has been beaten down since the beginning of the year, but traders remain hopeful for a rally.

Traders were selling May 39 calls for $0.15 and buying June 39 calls for $0.60 yesterday, according to OptionMonster’s real-time tracking systems. They were apparently rolling long positions from one strike to the next to get an additional month for the stock to rise.

Calls lock in the price investors must pay to buy stock, so they can generate leverage in the event of a rally. But they will expire worthless if the stock doesn’t move, so yesterday’s traders were paying the $0.45 difference between the two strikes to buy more time.

Exelon is a utility-services holding company that generates electricity from nuclear, fossil, hydro, and renewable-energy sources. The stock fell 0.21 percent to $38.82 yesterday and has been beaten to the lower end of its long-term range since the beginning of 2012. Recently it has bounced off the lowest lows as utility stocks draw attention for their strong dividend yields.

Calls in the stock outnumbered puts by almost 11,000 to 2,600, a reflection of yesterday’s bullish sentiment.

—Najarian has no positions in EXC.


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Additional Views: Where to Find Opportunities in Utilities

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Pete Najarian is a professional investor, CNBC contributor, regular co-host of CNBC’s “Fast Money” and co-founder of OptionMonster.com.

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