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