Top trader Najarian buys two energy stocks

Published Wed, Oct 28 20152:50 PM EDTUpdated Wed, Oct 28 20153:02 PM EDT

CNBC "Halftime Report" trader Jon Najarian bought shares of SunEdison in his model portfolio Wednesday, after spotting unusual options activity. SunEdison ( SUNE ), the biggest developer of clean energy, has seen its stock plunge more than 75 percent since June, following concerns over weak revenue trends as the company embarks on a buying spree, acquiring many of its competitors. As the stock underperforms, here's how the options trader is positioned for a potential move ahead: Source: FactSet SunEdison, a highly volatile name that's heavily shorted (15 percent short interest) and has been a top holding for some hedge fund managers, is projected to report earnings on Nov. 4. Najarian noted that options traders had purchased 11,375 November 7.50 calls for 72 cents to 83 cents against open interest of 232 contracts. Similarly, total option volume is running 140 percent of average in the company, but calls outnumber puts by 9 to 1, Najarian added. Analysts on Wall Street have a buy rating on SUNE with a 12-month price target of $21, implying a gain of 166 percent from here, according to FactSet. Read More 10 earnings stocks ready to rip or dip Najarian also bought shares of Encana ( ECA ), which is involved in the exploration and production of natural gas and oil. Shares of ECA rallied over 20 percent this month ahead of is earnings report slated for Nov. 12. For the year, however, the stock is still down 43 percent. Based on unusual options activity, Najarian said Encana is another name where traders bet on a rally. "12,214 of the January 8 calls were bought versus an open interest of 7,460 contracts," Najarian wrote in an email, explaining that most of these contracts were purchased for about 75 cents and 80 cents. "Shares were $14.50 in May and $9 in October, and the unusual call buying suggests some think shares trade through $9 & push $10 in the short-term," Najarian wrote. Source: FactSet Analysts have an overweight rating on ECA with a 12-month price target of $10.62, implying a 36 percent gain, according to FactSet. So far this year, Najarian's model portfolio is up 9 percent compared with a gain of 1 percent for the S &P 500. For all the picks and analysis of the "Halftime Report" Portfolio, click here. DISCLOSURE: Najarian's real portfolio is long options of SunEdison and Encana.

Employees of SunEdison install photovoltaic solar panels in Hillsborough, New Jersey.

Robert Nickelsberg | Getty Images

CNBC "Halftime Report" trader Jon Najarian bought shares of SunEdison in his model portfolio Wednesday, after spotting unusual options activity.

SunEdison (SUNE), the biggest developer of clean energy, has seen its stock plunge more than 75 percent since June, following concerns over weak revenue trends as the company embarks on a buying spree, acquiring many of its competitors.

As the stock underperforms, here's how the options trader is positioned for a potential move ahead: