CNBC Stock Blog

Why Are Options Bullish on This Power Company?

Traders were buying AES calls in large numbers yesterday, the second time this week that the interntional power company has seen upside option activity.

showed that 20,350 calls changed hands at the April 12.50 strike against open interest of just 692 contracts, clearly indicating new positions. More than 15,400 of those calls traded in a strong buying pattern, most of them going for $0.15 to $0.35.

AES closed yesterday up 3.02 percent to $11.60 and ticked up another 0.26 percent in after-hours trading. The stock dropped sharply after hitting its 52-week high at $15.44 in October and had been trading sideways until gapping down early last month.

The April 12.50 calls alone represented six times the total average volume of 3,418 contracts per day for all AES options. The average daily call volume at that strike is only 51 contracts.

For those calls to turn a profit, the stock would need to gain roughly 10 percent by the time the options expire in mid-April. AES is scheduled to release its next earnings report on May 3.

A longer-term trader was also bullish on the name in January 2011 contracts, buying 4,575 of the January 10 calls for $2.50 in three minutes. On Monday we reported call buying at the January 12.50 strike.

Overall calls in the name outnumbered puts by more than 26 to 1.


AES Competes With:


Duke Energy

American Electric Power

Constellation Energy

Options Trading School:




Najarian owns AES calls.


Pete Najarian is a professional investor, CNBC contributor, regular co-host of CNBC's "Fast Money" and co-founder of .