A large options trade Monday is betting on a dramatic move in Constellation Energy Group.
A trader today bought 4,600 puts at the February 25 strike and purchased 180,000 shares of CEG stock at $26, according to OptionMonster's proprietary tracking systems. That, my friends, is a "put-ratio backspread" — a spread that anticipates and demands a major move to make money.
A mere blip up or down will not profit with this strategy. This trade needs a large move, say 15 percent or more, to pay off.
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CEG, which is up some 1.5 percent to $26.70 in midday trading, has reached a definitive agreement to divest the majority of its London-based international commodities business, including its coal and freight operations and European energy trading units, to an affiliate of Goldman Sachs. The company is also pursuing the sale of its Houston-based downstream natural gas trading unit.
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That's what we know — but we don't know how much CEG will end up with. What we do know is that Constellation is scheduled to report earnings before the market opens on Feb. 18, and today's trade is apparently betting that we will know what CEG will get on that day. _________________________________
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Jon 'DRJ' Najarian is a professional investor, CNBC contributor, and cofounder of OptionMonster.com.